How Does Depreciation Affect Government Offices?


Asset depreciation affects every organization. However, government agencies must account for fixed assets differently than other organizations. Intrinsically, that means that they account for depreciation differently than for-profit businesses.

There are regulations called the Governmental Accounting Standards Board (GASB). GASB is enforced through the audit process or by state law. These regulations have established financial reporting standards for state and local governments.

GASB also applies to public authorities, public hospitals, and public universities. As part of the law, these statements outline ways to reduce financial inconsistencies and help companies keep regulations.

The GASB rule that applies most to governmental offices is No. 34. - the rule on primary financial statements.

GASB Statement No. 34 and Depreciating Government Assets

Statement No. 34 requires government entities to use accrual accounting to depreciate their capital assets.

It defines capital assets as having a longer useful lifespan than can be measured in one reporting period. These assets include the following:

  • Buildings
  • Easements
  • Historical Treasures
  • Land
  • Land Improvements
  • Machinery and equipment
  • Transportation and Utility Structure
  • Vehicles
  • Works of Art

Reporting the value of these assets is a necessary part of reporting the depreciation of this government property. Therefore, you cannot do one without the other.

Capital assets must be reported at historical cost. Donated assets are to be recorded at the market value upon the time received.

Assets that you must depreciate get reported on net asset statements. These get tracked separately from non-depreciable assets. Three categories display governmental assets. They include:

  • Capital assets net related debt
  • Restricted assets, including ones that have external constraints on their use
  • Unrestricted assets

Shared assets must have shared depreciation values.

Assets that have specific functions but also include depreciation expenses must be included in direct costs. Direct expenses include ones tied to specific purposes. Additionally, they include ones that are connected to governmental services or departments. This is why many governmental entities opt to use government asset management software.

Depreciating Governmental Fixed Assets

Governmental assets use straight-line and declining balance depreciation methods.

Here's a brief rundown of what that looks like:

Straight-line balances are calculated by subtracting asset cost from salvage value and dividing that by the number of years it is expected to be in use.

While declining balance depreciation is a type of accelerated depreciation that decreases as the asset ages, it applies a depreciation rate to the asset's value at the start of each financial period. There are several types of declining depreciation, including a double-declining balance and a 150% declining balance.

There's no "right" way to depreciate your assets. Your department needs to figure out what the best way is for how you run your office. Some methods may be helpful for certain types of assets but not others. Meet with your accounting department and get a detailed rundown of how depreciation works. You'll also want to ask what you must do to make room for it in your accounting practices.

Trying to track all of the assets subject to depreciation and how that affects your financial reporting can get complicated. However, it doesn't have to be.

Asset Panda's Government Fixed Asset Management Software

With Asset Panda, you can track your assets, usage, and depreciation, regardless of which method you use to calculate that decrease in value. There are specific fields that help you run depreciation for you so that you can check it against the software.

But you shouldn't have to figure it all out on your own. With Asset Panda, you can rely on automated depreciation tracking to prevent you from having to do it yourself.

Interested in seeing how Asset Panda can help manage the depreciation of government assets? Try our system free for 14 days (no card required).

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