GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, requires that all intangible assets not specifically excluded be classified as capital assets. Like GASB Statement 34, this statement was phased in so that Phase 1 and 2 cities must retroactively report intangible assets acquired since June 30, 1980, except for those intangible assets that have indefinite useful lives and those internally generated. Retroactive reporting for Phase 3 cities is encouraged but not required.

If there are no factors that limit the useful life of an intangible asset, then it is considered to have an indefinite life and therefore not depreciated. Assets with indefinite useful lives and those internally generated do not have to be retroactively reported. This statement is effective for periods after June 15, 2009, so it first applied to fiscal year 2010 audit.

This publication provides direction in accounting for and properly reporting assets in governmental funds. Governmental accounting or fund accounting had been evolving slowly until the Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis--for State and Local Governments. Statement No. 34 (GASB 34) had been in development for 15 years before its 1999 release. It was not only quite comprehensive but burdensome for small governments.

One of the requirements for Tennessee local governments is to provide disclosures of all of their assets, both current and capital (long term). Governments are required to capitalize general infrastructure assets and report these assets in the government-wide statement of net position. The annual cost of using general infrastructure assets must be reported in the statement of activities as an operating expense (depreciation). Cities literally, have to keep two sets of books.

Prior to GASB 34, local governments were required to maintain a fixed asset accounting system (FAAS), but it was not part of the financial statements. Many cities did not adequately maintain a FAAS, which usually resulted in a "finding" in the annual audit. Under GASB 34, those findings result in either an adverse or a qualified auditor's opinion because those long-term assets are a part of the government-wide new financial statements.

GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, requires that all intangible assets not specifically excluded be classified as capital assets. Intangible assets include easements, water rights, computer software, and trademarks.

A municipality's capital assets are the tangible and intangible assets purchased or obtained through transactions or events. Capital assets are classified as buildings, equipment, improvements other than buildings, infrastructure, construction in progress, intangibles, or land. In the private sector, these assets generally are referred to as property, plant, and equipment.