Case: Capital Assets and Leases in Practice

If you only read one thing A real county’s capital asset footnote pulls together everything from this module, acquisition, depreciation, and a lease, in one place.

Why This Matters

Reading about depreciation and capital projects in isolation is one thing. Opening a real ACFR’s capital asset note and making sense of it is another, and this case closes that gap.

What’s Actually Going On

A typical county’s capital asset note breaks assets into categories, land, buildings, improvements, equipment, and infrastructure, each with beginning balance, additions, disposals, and ending balance for the year. Depreciation is disclosed separately, by category, matching the useful lives FM6.3 covered.

Leases show up differently since GASB 87. A multi-year copier lease, for example, gets recorded as a right-to-use asset and a corresponding lease liability, not treated as a simple annual rental expense the way it might have been under older rules.

Worked example: a capital asset note shows Land $1,200,000 (no depreciation shown), Buildings $18,400,000 with $6,100,000 accumulated depreciation, Equipment $2,300,000 with $1,050,000 accumulated depreciation.
Net book value: Land $1,200,000 (no depreciation to subtract), Buildings $18,400,000 − $6,100,000 = $12,300,000, Equipment $2,300,000 − $1,050,000 = $1,250,000. Total net book value: $14,750,000.
Notice land carries no accumulated depreciation line at all, exactly matching FM6.3’s rule.

How This Applies

When you’re reading a capital asset footnote, check that land never shows accumulated depreciation, that’s a fast way to confirm the note is being prepared correctly, and a red flag worth investigating if it isn’t.