GASB 34-An Overview

GASB 34 is Statement Number 34 from the Government Accounting Standards Board (GASB). GASB 34 establishes new accounting rules for governments. These rules apply to all governments and their agencies, including most utilities.

The changes GASB 34 brings to governmental accounting are the most sweeping in decades. The key changes are that all governments (on a sliding implementation schedule) must do the following:

• Document the value of their capital assets
• Either depreciate their assets or demonstrate that they are maintaining their value
• Issue full disclosure financial reports that present this information

GASB 34 is not law, but it has the same effect as law. All governments must follow "Generally Accepted Accounting Practices" (GAAP) in preparing their financial reports. If they do not there are many adverse consequences, both political and financial (particularly in terms of their bond rating). GASB sets GAAP for governments and GASB 34 revamps these.
As a result of GASB 34, most governments are (or should be) considering implementing a Capital Asset Management Program. A sound Asset Management Program for a government or utility:

• Identifies the entity's major capital assets (e.g., its "infrastructure")
• Documents the condition of each capital asset
• Documents improvements that change the condition or value of a capital asset
• Provides a means for prioritizing investments in capital assets

The alternative to an Asset Management Program under GASB 34 is asset depreciation. By depreciating its assets, the entity "writes off" the value of the asset over time. This is standard practice for the private sector; depreciating assets reduces taxable income and provides additional revenue for asset renewal and replacement. However, governments do not gain these tax advantages. Depreciation reduces the "book value" of governmental assets without providing an additional revenue stream for renewal and replacement. Progressive governments will opt for an Asset Management Program.

To see if your utility is compliant with GASB 34, participate in our online survey and view our compiled results.