ctcLink Accounting Manual | 40.40.40 Asset Accounting

40.40.40.1.a Asset Acquisitions

Capital asset expenditures for governmental funds (001, 08A, 057, 060, 145, etc.) are recorded in the operating fund except for capital projects funded by local government funds, which are recorded in Fund 147. But the asset entries (asset, depreciation, investment in capital assets, etc.) are recorded in Fund 997 for all governmental funds.

Capital assets may be purchased as a single large purchase or may be constructed using multiple smaller purchases. In governmental fund type accounts, acquisitions of capital assets are recorded by debiting capital expenditure accounts 5040010- 5040670 in the Reporting Class: 5040000-5049999 Capital Expenditures section.

If the capital asset acquisitions are funded by a Certificate of Participation (COP) from the State Treasurer, the assets are recorded by debiting COP capital expenditure accounts 5040140 through 5040275 in the Reporting Class: 5040000-5049999 Capital Expenditures section.

40.40.40.1.b Asset Additions

All capital asset transactions for governmental funds (those not in Funds 4xx or 5xx - excluding 561 and 489) are recorded in Fund 997 Class 211 State Purpose IT N. In all instances, the asset type account is debited, and the Investment in General Capital Assets is credited. The asset entries also apply to donated asset additions.

40.40.40.1.c Asset Addition Accounting Entries

40.40.40.1.d Asset Donations

When capital assets are donated to a governmental fund type account, no entry is made in the operating funds because governmental funds use the current financial resources measurement focus.

The capital assets should be recorded in Fund 997 “General Capital Assets Subsidiary Account” at their estimated acquisition value at the date of donation plus all appropriate ancillary costs as a debit to the asset (112xxxx) and a credit to Investment in General Capital Assets (3000050).

40.40.40.1.e Asset Transfers

When a capital asset is transferred from (sold by) one agency/college to another, the receiving agency/college is to record the asset at the carrying value of the transferring agency. The transferring agency is to provide the receiving agency with the carrying value of the asset transferred. The asset is recorded in Fund 997 as an addition.

When a capital asset that was used to support a function reported in a proprietary or fiduciary fund type account is later transferred to a governmental fund type account, the asset is only recorded in Fund 997 as an addition.

The proprietary or fiduciary fund type fund records the activity using the book value of the capital asset offset by a gain or loss on disposition (transfer out).

40.40.40.1.f Asset Transfer Accounting Entries

40.40.40.1.g

Governmental to Proprietary Fund

Governmental Funds Transfer Out

Proprietary Funds Transfer In

40.40.40.1.h Proprietary to Governmental Fund

Proprietary Funds Transfer Out

Proprietary Funds Transfer In

40.40.40.1.i Depreciation

Certain assets without a definite life or temporarily not in service are not depreciated:

• Land
• Intangible Assets Indefinite Life
• Artwork and Historical Landmarks
• Non-Depreciable Collections
• Construction in Progress

40.40.40.1.j Depreciation Accounting Entries

Note 1

Capital expenditures part of a capital project should be recategorized to CIP at fiscal year end and then to the constructed capital asset at the time it is placed into service. Depreciation should begin at the time the asset is placed into service.

At the end of each accounting period the depreciation process should be run as described in the ctcLink Reference Center 9.2 Closing Depreciation & Accounting Periods.

ctcLink is configured to calculate and record depreciation based upon the Cost Type (Governmental or Proprietary) and Asset Profile.

The depreciation accounting entries will inherit the entire chartstring of the asset as it is recorded in the asset detail except the account. The account is determined by the accounting template for each Cost Type (G or P). Governmental depreciation should be recorded using the above noted debits and credits.

40.40.40.1.k Asset Retirement/Sale/Trade-In

The accounting treatment differs for governmental (not proprietary or internal service funds) assets when they are retired, sold,or traded. The accounting treatment also differs if the asset is not fully depreciated.

40.40.40.1.l Asset Retirement/Disposal Accounting Entries

Asset Removal – Non-Depreciable

Asset/Allowance for Depreciation (AD) Removal – Fully Depreciated

Asset/Allowance for Depreciation Removal – Not Fully Depreciated

40.40.40.1.m Asset Sale

When capitalized governmental fund assets are sold, all the above entries must still be recorded. However, the actual sale accounting entries must be recorded in a governmental fund.

When the capital asset is sold, the proceeds realized from the sale of property are to be deposited into the fund from which the property was purchased or if such fund no longer exists, into a local governmental fund.

Proceeds derived from state general or state capital funds assets which are not budgeted trade-ins, must be remitted to the Office of State Treasurer to revenue account 4030050 (if required by statute or original state funding authorization).

For step-by-step instructions see the ctcLink Reference Center Retiring Assets by Sale.

40.40.40.1.n Asset Sale Accounting Entries

Governmental Fund

40.40.40.1.o Asset Trade-In

When an asset is traded in for a new asset, the net purchase price is recorded in the state or local governmental fund.

In the General Capital Assets Subsidiary Fund 997 the equipment is credited, the allowance for depreciation is debited, and Investment in General Capital Assets account (3000050) is debited for the difference.

Since trade-ins are most likely to occur with Furnishings and Equipment, the example below shows those entries.

40.40.40.1.p Asset Trade-In Accounting Entries

Governmental Fund

General Capital Assets Subsidiary Account

Proprietary funds include both enterprise funds (5xx except 561) and internal service funds (4xx except 466 and 489).

40.40.40.2.a Asset Additions

All capital asset transactions for proprietary funds are recorded in the respective fund/class. Initially, all assets are recorded as a purchase debiting the expense and crediting the liability/cash account.

40.40.40.2.b Asset Addition Purchasing Entries

40.40.40.2.c Capital Expense to Capital Asset Entries

In proprietary funds, the purchase of an asset is essentially an exchange of one asset (cash) for another asset (capital).

Therefore, when the asset is placed into service, the expense account should be recategorized to a capital asset account. In many cases multiple capital expense accounts are accumulated into a single asset account (e.g., Grounds Development, Architectural and Engineering etc. may be rolled into the value of a building in addition to construction costs).

Budgeted proprietary capital projects are treated in a different manner which is described below.

Note 1

For constructed assets, Grounds Development, Architecture, Capital Planning, Artwork, Historical Collections, Relocation Costs are recategorized to Construction in Process at the end of each fiscal year in proprietary funds. When the capital asset is placed in service, CIP is recategorized to the appropriate capital asset (buildings, infrastructure, improvement other than buildings, etc.)

Note 2

The expense is recorded only as an Intangible Asset, but the Capital Asset entry should be recorded as an Intangible Asset with either a Definite or Indefinite Live. Definite Live assets will be depreciated. If Artwork or Historical Collections have an indefinite live, the asset entry should be recorded using account 1120040 Non-Depreciable Collections.

Note 3

Library books are rarely/ever purchased with COP funds or in proprietary funds, therefore COP or Prop Adjustment Library Books expense accounts do not exist.

40.40.40.2.d Proprietary Appropriated/Budgeted Projects

40.40.40.2.e Expense to Capital Asset Accounting (Proprietary Adjustment)

When the capital asset is acquired in an appropriated/budgeted proprietary fund – capital projects acquired or constructed (when a capital project ID is assigned by the SBCTC Capital Budget group, and the project is tracked in CapTrack) additional transactions are necessary prior to the end of the budget period.

The original capital expense accounts are not reversed/recategorized; instead, Proprietary Adjustments accounts are credited for an amount equal to the original capital expense. This maintains the capital budget expenses in CapTrack while reducing the expense in ctcLink.

Note 1

For constructed assets, Grounds Development, Architecture, Capital Planning, Artwork, Historical Collections, Relocation Costs are recategorized to Construction in Process at the end of each fiscal year in proprietary funds. When the capital asset is placed in service, CIP is recategorized to the appropriate capital asset (buildings, infrastructure, improvement other than buildings, etc.)

Note 2

The expense is recorded only as an Intangible Asset, but the Capital Asset entry should be recorded as an Intangible Asset with either a Definite or Indefinite Live. Definite Live assets will be depreciated. If Artwork or Historical Collections have an indefinite live, the asset entry should be recorded using account 1120040 Non-Depreciable Collections.

Note 3

Library books are rarely/ever purchased with COP funds or in proprietary funds, therefore COP or Prop Adjustment Library Books expense accounts do not exist.

40.40.40.2.f Asset Transfers

For asset transfers between governmental and proprietary funds see guidance CLAM 40.40.36.a.

40.40.40.2.g Donated Assets (Proprietary Funds Only)

Donated assets are recorded as debit to the asset account and a credit to a revenue account 4220010 Non-Cash Capital Contributions. Since this is not an expense, the State Purpose – IT value should always be ‘N’.

40.40.40.2.h Donated Asset Addition Accounting Entries

Note 1

Donated services should be recorded as the completed capital asset at the time it is placed in service.

Since no expenses were created with the addition of donated assets, the expense elimination/adjustment entries are not required.

The asset cost should be recorded as the market value assigned at the time of receipt (amount recorded as revenue) and should be depreciated as if the asset had been purchased.

40.40.40.2.i Depreciation (Proprietary)

Certain assets without a definite life or not in service are not depreciated including:

• Land
• Intangible Assets Indefinite Life
• Artwork and Historical Landmarks
• Non-Depreciable Collections
• Construction in Progress

40.40.40.2.j Depreciation Accounting Entries (Proprietary)

ctcLink is configured to calculate and record depreciation based upon the Cost Type (Governmental or Proprietary) and Asset Profile.

The depreciation accounting entries will inherit the entire chartstring of the asset as it is recorded in the asset detail except the account. The account is determined by the accounting template for each Cost Type (G or P).

Note 1

Capital expenditures part of a capital project should be recategorized to CIP at fiscal year end and then to the constructed capital asset at the time it is placed into service. Depreciation should begin at the time the asset is placed into service.

At the end of each accounting period the depreciation process should be run as described in the ctcLink Reference Center9.2 Closing Depreciation & Accounting Periods.

40.40.40.2.k Asset Retirement/Sale/Trade-In (Proprietary)

The accounting treatment differs for proprietary fund assets if they are retired, sold or traded.

In each event, the Allowance for Depreciation (allowance for depreciation) is debited for depreciation to date and the Capital Asset account is credited for the asset cost. The accounting entries vary if the asset is retired, sold, or traded in.

40.40.40.2.l Asset Retirement/Disposal Accounting

Land and Non-Depreciable Collections are rarely retired or disposed of and therefore asset removal entries are not necessary.

It is possible that an Intangible Assets with Indefinite Life would lose value and could be retired or disposed. The asset account (1120030) would be credited, and the Gain/Loss on Sale Capital Asset account (4130010) would be debited.

When a fully depreciated asset is retired or disposed of, the Allowance for Depreciation account is debited, and the Asset account is credited.

When a partially depreciated asset is retired or disposed, the Allowance for Depreciation is debited, the Asset account is credited, and the Gain or Loss on Sale of Capital Asset account (4130010) is debited for the variance between the asset value and allowance for depreciation.

Asset Removal – Non-Depreciable

Asset/Allowance for Depreciation (AD) Removal – Fully Depreciated

Asset/ Allowance for Depreciation Removal – Not Fully Depreciated

Note 1

Capital expenditures part of a capital project should be recategorized to CIP at fiscal year end and then to the constructed capital asset at the time it is placed into service.

40.40.40.2.m Asset Sale (Proprietary)

When capitalized propriety fund assets are sold, the entries combine the asset disposal transactions, cash and gain or loss in same fund as the asset.

When the capital asset is sold, the proceeds realized from the sale of property are to be deposited into the fund from which the property was purchased.

Sale of non-depreciable assets generally debit cash (or other asset, i.e., receivable) and credit the asset and debits or credits the gain or loss on the sale of capital assets for the difference between the book value and the sale amount.

Sale of partially depreciated assets generally debit cash (or other asse, i.e., receivable) and credit the asset, debits the allowance for depreciation and either debits or credits the gain or loss on the sale of capital assets for the difference between the book value, allowance for depreciation and the sale amount.

For step-by-step instructions see the ctcLink Reference Center Retiring Assets by Sale.

40.40.40.2.n Asset Sale Accounting (Proprietary)

Asset Sale – Non-Depreciable

Asset Sale – Fully Depreciated

Asset Sale – Not Fully Depreciated

40.40.40.2.o Asset Trade-In (Proprietary)

In proprietary and trust funds, gains are not recognized on a trade-in. The capital asset traded-in and its associated accumulated depreciation are removed from the accounting records and the balancing entry is added to the cost of the new capital asset.

40.40.40.2.p Asset Trade-In Accounting