9-1: Capital assets

Effective: March 16, 1998
Revised: October 15, 2025
Approved by: Van Christensen
References: GASB Cod. Sec. 1400 Reporting Capital Assets (2024 Edition), GASB Cod. Sec. L20 Leases (2024 Edition), GASB Cod. Sec. S80 Subscription-Based Information Technology Arrangements (2024 Edition), Administrative Code R33-126

Purpose

This policy establishes guidelines for the management, depreciation, and disposal of capital assets to ensure proper accountability, financial reporting, and compliance with applicable laws and regulations.

Compliance with this policy involves the use of the capital asset module in Vantage Financial for all capital asset tracking and management. Refer to the Capital assets training course for detailed instructions on recording and managing capital assets within the state’s system.

Definitions

Agency – Any agency, board, bureau, commission, office, department, or other administrative subunit of the executive branch of state government.

Capital assets – Tangible or intangible assets used in operations with a useful life of more than two years and a minimum acquisition cost. Capital assets include, but are not limited to:

Land and improvements to land, including rights-of-way and easements
Buildings and building improvements
Furniture and fixtures
Vehicles
Machinery and equipment
Infrastructure assets, such as roads, bridges, sidewalks, water lines, sewers, and drainage systems
Intangible assets, such as easements, water rights, timber rights, computer software, right-to-use lease assets, and right-to-use subscription-based information technology arrangements (SBITA) assets

Capitalize – To record a cost as an asset instead of an expense. In this case, the cost is included in the asset’s value and expensed over the asset’s life, except assets recorded with a modified approach.

Carrying amount – The original cost of the asset minus applicable accumulated depreciation or amortization, and minus any impairment losses.

GovOps – The Department of Government Operations.

Right-of-use asset – A lessee’s right to use an asset over the course of a lease.

Straight-line method – A depreciation method that allocates the cost of an asset evenly over its useful life.

Policy

A – Capital assets must be recorded and accounted for

1 – Capital assets acquired or constructed from public funds must be tracked and accounted for in the capital asset module in Vantage (the book of record).

2 – All capital assets of the state must be controlled via physical control mechanisms and accounting to assure that all assets acquired from operations are accounted for and properly reported.

3 – Certain infrastructure assets—specifically roads and bridges maintained by the Department of Transportation—are reported using the “modified approach.” Under this method, the assets are not depreciated. Infrastructure assets not reported under the modified approach, as well as improvements that increase capacity or efficiency, must be capitalized and depreciated.

4 – All costs incurred for routine maintenance, repairs, and minor restoration that do not significantly extend an asset’s useful life or increase its productive capacity must be expensed in the period incurred.

5 – Costs should only be capitalized if they result in a new asset or materially enhance an existing one—such as extending its useful life, increasing its service capacity, or improving operational efficiency—and if they meet the applicable capitalization threshold.

B – Capitalization thresholds determine if an asset is recorded

1 – Capitalization thresholds are applied by asset category to determine whether an asset should be recorded in the capital asset module in Vantage. To be capitalized, assets must meet both the dollar threshold defined below and have an expected useful life of more than two years. However, right-to-use lease and subscription assets follow the guidance in section B4.

2 – Tangible capital assets and off-the-shelf software are capitalized when their acquisition cost equals or exceeds the minimum threshold set by Uniform Guidance under 2 CFR 200.313 (currently $10,000). This threshold will automatically adjust to reflect any changes to Uniform Guidance, with updates taking effect at the start of the following fiscal year (beginning July 1). The following exceptions apply:

Land is always capitalized, regardless of acquisition cost.
Infrastructure assets are capitalized when costs exceed $1,000,000.

3 – Internally generated software is capitalized when the total expected project cost exceeds $500,000.

4 – Right-to-use assets under leases (GASB 87) and subscription-based IT arrangements (SBITAs, GASB 96) are capitalized if:

the noncancelable contract term is greater than 12 months; and
the annual total payments exceed $50,000 per contract or subscription.

4a – Short-term leases or SBITAs (a term of 12 months or less) are not capitalized, regardless of dollar amount.

C – Capital assets must be recorded with the proper valuation

1 – Capital assets are accounted for at acquisition cost or, if cost is not practically determinable (i.e., when original records are unavailable or unreliable), at estimated fair market value at the time the asset is placed into service.

2 – Acquisition cost includes the purchase price plus any taxes, transportation costs, installation fees, and other costs necessary to place the asset into service.

3 – Donated assets are recorded at fair market value at the time of donation or at fair value if fair market value is not readily determinable.

4 – Modular furniture and other grouped assets that function as a single unit should be capitalized based on the total acquisition cost of the grouping rather than as individual assets.

D – Federal assets must be clearly identified

1 – Assets purchased with federal funds and/or federal government-owned assets entrusted to state agencies must be clearly identified as federal property (e.g., through labeling or tagging) and safeguarded according to federal regulations and agency guidelines.

E – Depreciation and amortization must be recorded for applicable capital assets

1 – Capital assets must be depreciated or amortized over their useful lives unless specifically excluded. Depreciation is not recorded for:

Land and inexhaustible land improvements
Construction in progress (CIP)
Certain infrastructure assets reported using the modified approach.

2 – Capital assets are depreciated or amortized using the straight-line method. The list below provides high-level ranges for general planning purposes only. Agencies should use the specific useful lives in policy 9-2: Standard useful life table for depreciation and asset setup.

Buildings & Improvements: 10–40 years
Equipment & Furniture: 3–15 years
Vehicles: 3–15 years
Infrastructure: 15–80 years
Land Improvements: 5–25 years

3 – Lease assets and SBITAs are amortized over the term of the lease or subscription. Amortization ends at the earlier of the end of the lease/subscription term or the date the underlying asset is no longer in use by the agency. Amortization is calculated using either the effective interest method or the straight-line method.

F – All capital assets must be assigned a custodian

1 – The custody of capital assets is assigned to the agency that physically possesses and primarily uses or manages the asset. Custody includes the responsibility for the maintenance and management of the asset.

2 – Custodians are responsible for keeping accurate records of the asset’s location, condition, and usage.

3 – For movable equipment not permanently affixed (i.e., equipment that can be removed without extensive alterations or repairs to the building, such as desks, chairs, copiers, vehicles, etc.), the custodial responsibility is assigned to the agency that primarily uses the asset, regardless of which agency originally purchased the asset.

4 – For buildings, structures (including permanently affixed assets), and land, custodial responsibility is assigned to those responsible for their management. Custody of these types of assets includes the responsibility for the repair, security, and general upkeep of the facility or land. It also includes the authority to control access to the building, land, or structure.

G – Agencies must track and maintain accurate records of capital assets

1 – Each custodial agency is responsible for maintaining accurate records of capital assets. These records must include:

a detailed description of the asset;
its location;
condition;
acquisition date;
acquisition cost;
useful life; and
usage.

2 – Physical inventories must be conducted at least once every fiscal year. Discrepancies must be documented, investigated, and resolved promptly.

3 – All tangible equipment must be tagged with a capital asset tag that includes a unique ID number. This tagging system facilitates tracking, accountability, and proper disposal of assets.

4 – Agencies must update their Vantage capital assets listings monthly to reflect asset acquisitions, dispositions, and necessary corrections. Additionally, agencies must reconcile the total dollars charged to capital outlay object codes monthly with corresponding changes in the capital asset module in Vantage to ensure accuracy and accountability.

4a – Any discrepancies must be documented, investigated, and resolved promptly.

5 – See Capital assets reconciliation template for assistance with monthly reconciliations.

H – Capital assets should be reviewed for impairment

1 – Capital assets should be reviewed for impairment when significant events or changes in circumstances indicate that the carrying amount may not be recoverable.

2 – Significant events or changes in circumstances that may indicate impairment include, but are not limited to:

significant decreases in market value;
obsolescence;
damage; and/or
a significant change in the extent or manner in which the asset is used.

3 – Agencies must report any possible impairment of assets to the GovOps Division of Finance for further evaluation.

3a – If an asset is determined to be impaired, the agency reduces the carrying amount to its fair value, and an impairment loss will be recognized.

I – Agencies are responsible for following capital asset disposition procedures

1 – Agencies are responsible for disposing of capital assets in accordance with the procedures outlined in Administrative Code R33-126, and for updating fixed asset records when an asset is removed from service (lost, stolen, destroyed, scrapped, sold or impaired).

2 – When a capital asset is no longer needed by an agency, the agency should coordinate with the GovOps Division of Purchasing and General Services’ Surplus Property to arrange for sale or disposal. Surplus Property is responsible for physically disposing of the asset and remitting any sale proceeds—less applicable disposal fees—to the owning agency.

3 – Agencies are responsible for promptly removing the asset from capital asset records once it is no longer in service. Proper documentation must be maintained and should include:

a description of the asset;
the reason for disposal (e.g., loss, theft, damage, sale);
the date of disposal; and
any proceeds received from the sale.

5 – Any capital asset that is suspected stolen must be reported to the Attorney General’s Office.

6 – For detailed instructions on capital asset disposal, see module 5 in the Capital assets training course.

J – Information-only assets may be tracked

1 – Information-only assets are items that agencies track for internal purposes but do not meet the capitalization criteria outlined in this policy.

2 – Agencies should track information-only assets, such as cameras, radios, firearms, electronic devices, data processing equipment, and any other high-risk or easily portable items that may be susceptible to loss, to mitigate the risk of fraud, theft, or abuse. Tracking these items also helps with inventory management, accountability, and insurance purposes.

3 – For detailed instructions on information-only assets, see module 4 in the Capital assets training course.

K – Capitalized improvements must be depreciated unless inexhaustible

1 – Land improvements add value to the land and can be inexhaustible or exhaustible:

Inexhaustible (non-depreciated) land improvements include costs that are necessary to develop the land to its intended use. Initial improvement costs, such as clearing, filling, grading, and leveling of land, are included in the cost of the land.
Land improvements that are exhaustible (depreciated), or deteriorate over time, are capitalized separately and depreciated (e.g., parking lots, fences, and landscaping).

2 – Building and land improvements must be capitalized if they prolong the useful life of the asset and/or increase the value or future economic benefit of the asset.

3 – Regular maintenance or minor renovations are not capitalized.

L – Construction in progress costs must be tracked

1 – Agencies are responsible for tracking the costs associated with construction in progress (CIP), including labor, materials, and other project-related expenses, and ensuring that capital asset records are established in the capital asset module in Vantage upon project completion.

2 – If the Division of Facilities Construction and Management (DFCM) manages a construction project on behalf of the state or an agency, but will not serve as the long-term custodian of the completed asset, DFCM will notify the agency that will assume custodial responsibility once the project is complete and ready for capitalization. The custodial agency is then responsible for recording the asset in the capital asset module in Vantage in accordance with the state’s capitalization policies.

3 – Agencies should ensure prompt and accurate updates to the capital asset module in Vantage to reflect the transition from construction in progress to a capitalized asset. Refer to the Capitalization of constructed assets guideline for further details on criteria to consider for capitalizing construction in progress.

M – Leases and SBITAs must be reviewed and recorded as right-of-use capital assets if applicable

1 – Leases and SBITAs (Subscription-Based Information Technology Arrangement) that meet the definition of a right-of-use asset, as defined by GASB 87 and GASB 96 (as applicable) and this policy, must be recorded as capital assets.

2 – Agencies must maintain records for lease assets and SBITAs, including contract terms, payment schedules, and any modifications, and provide these records to the GovOps Division of Finance for evaluation. The Division will assess agreements to determine whether they meet the definition of a right-to-use arrangement under GASB 87 and GASB 96 requirements, as applicable.

3 – Right-of-use assets, including lease assets and SBITAs, are capitalized at the present value of lease or subscription payments. Under GASB 96, costs incurred during the application development stage of a SBITA may be capitalized as part of the subscription asset.

3a – Agencies must ensure these costs are properly documented and submitted to the GovOps Division of Finance for evaluation and capitalization. Finance is responsible for recording and maintaining the capitalized lease asset and SBITA records.

4 – For more information on proper object coding, refer to the support resources in the fiscal year-end closing guide.

N – Internally developed software must be capitalized if it meets GASB 51

1 – Internally developed software must be capitalized if it meets the criteria outlined in GASB 51. Costs incurred during the preliminary project stage must be expensed, while costs incurred during the application development stage must be capitalized if all criteria are met.

2 – Agencies are responsible for tracking all costs associated with internally developed software projects if it is expected that total project costs will exceed $500,000, and reporting these costs to the GovOps Division of Finance annually. The Division will record the work in progress until the software is placed in service.

3 – Agencies are responsible for recording the completed software asset in the Vantage capital asset records. Capitalization and amortization begins when the software is placed in service.

4 – Agencies must maintain thorough project documentation supporting capitalization decisions. See the GovOps Division of Finance’s Year-End Closing Package for additional guidance on internally developed software capitalization.

O – The GovOps Division of Finance maintains and reports capital asset records

1– The GovOps Division of Finance is responsible for maintaining the official capital asset records and generating necessary reports.

2 – The GovOps Division of Finance distributes monthly capital asset reports, including inventory summaries, capital expenditures, and asset transaction reports, to the appropriate agencies.