Valuing Capital Assets

After completing the physical inventory, the next step is to assign a dollar value to each capital asset identified. Where possible, capital assets should be recorded at historical cost. While this step can be time consuming, actual costs usually can be found by searching prior years’ financial records and source documents. The objective is to determine the initial investment, not the present market or replacement value. If you cannot determine cost, the following alternatives can be used, in this order, to determine the value of capital assets:

1. Estimated cost at the time the asset was purchased or constructed; or
2. Fair market value at the time the capital asset records are established.

For infrastructure assets, GASB Statement No. 34 included special requirements for reporting existing infrastructure. Cities should follow the requirements that apply to their circumstances when determining which infrastructure assets need to be reported.

GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, established requirements for accounting for intangible assets, such as computer software and certain other nonphysical assets.

If no historical records exist and the original cost cannot be determined, a city can use current replacement costs and adjust the amount to estimate the cost at the time the asset was acquired or constructed. If no better records exist, a city could hire an expert to estimate the cost. Finance personnel may also consult with the city's external auditor to determine if the available cost information is acceptable for financial statement reporting.