For the fiscal year 2010 Comprehensive Annual Financial Report (CAFR), the Division of Accounts and Reports must implement Governmental Accounting Standards Board Statement Number 51 (GASB 51), Accounting and Financial Reporting for Intangible Assets. GASB 51 now requires the State to capitalize intangible assets. Examples of intangible assets include computer software, easements, water rights, timber rights, patents, and trademarks. GASB defines intangible assets as having all of the following:
One of the items that need specific attention is the capitalization of internally developed intangible assets (developed in-house by agency personnel or third-party contractor on behalf of the agency). Internally developed intangible assets should be capitalized if the following has occurred:
For internally developed intangible assets, expenditures incurred subsequent to meeting the above criteria should be capitalized. For internally generated software, only capitalize the application development stage of internally generated software. GASB 51 defines three stages of software development as:
Data conversion should be considered an activity of the application development stage only to the extent it is determined to be necessary to make the computer software operational for use. Otherwise, data conversion should be considered an activity of the post-implementation/operation stage. Costs associated with internally generated computer software should be applied based on the nature of the activity, not the timing of its occurrence.
Software updates should only be capitalized only if it meets the threshold and one of the following applies:
For CAFR reporting, we have established a threshold of $250,000 for intangible assets (including software). Agencies still have stewardship responsibilities for all intangible assets less than $250,000, however, these items will not be reported in the CAFR or form DA-87. For those agencies with Federal funds, you should be aware that the Federal threshold is currently set at $5,000.
Retroactive reporting is required for intangible assets acquired July 1, 1980 or later, except those with indefinite useful lives and internally generated intangible assets. For indefinite useful lives intangibles and internally generated intangible assets, reporting is required to begin with fiscal year 2010 expenditures. As in previous years, Accounts and Reports will provide agencies form DA-87 with the beginning balances as provided for FY 2009. To assure we are recording these transactions correctly in the CAFR, for FY 2010 we have inserted a worksheet to reconcile changes due to GASB 51. If your agency has any intangible assets that are not software, please provide a description of the asset on the form DA-87.
Should you have any questions, please contact Gail Barnhart at (785) 296-3404 (Gail.Barnhart@da.ks.gov), Fatima Gilbert (785) 296-2127 (Fatima.Gilbert@da.ks.gov) or Leroy Charbonneau at (785) 296-2130 (Leroy.Charbonneau@da.ks.gov).