Acquiring a Capital Asset

If you only read one thing A capital asset is recorded at cost, at the government-wide level, the moment it’s acquired. That’s the first of four life stages this module walks through one at a time.

Builds on FM4.1 At the fund level, buying equipment is just an expenditure. At the government-wide level, it becomes an asset. Acquisition is where that asset first gets recorded.

Why This Matters

Everything else that happens to a capital asset, depreciation, impairment, eventual disposal, starts from the number recorded here. Get acquisition wrong, and every later calculation is wrong too.

What’s Actually Going On

When a government acquires a capital asset, purchase, construction, or donation, it’s recorded at cost, at the government-wide level. Cost includes not just the purchase price but reasonable costs to get the asset ready for use, delivery, installation, site preparation.

A donated asset gets recorded too, at its acquisition value (generally fair value at the time of donation), even though no cash changed hands. Governments don’t get to leave gifted buildings or equipment off the books just because nothing was paid for them.

How This Applies

When a capital asset shows up on the books at a number that looks too low, check whether related costs, delivery, installation, site work, got left out of the acquisition cost instead of being capitalized along with the purchase price.