Common GASB 34 Challenges
If you have already implemented GASB 34´s prospective reporting requirements then you are fully aware of the challenges and issues that a compliance effort poses. As the deadline for retroactive reporting approaches, many of the issues you side stepped under prospective reporting are back - only this time you may have fewer options in dealing with them.
1. Reporting requirements are overwhelming
Outside of enterprise funds, most governmental units have never accounted for infrastructure in their financial statements. Consequently, there is often little documentation of infrastructure projects, service methods, expenses and maintenance levels associated with the preservation of community infrastructure, as such, many of the following questions must be answered:
- How will infrastructure assets built or improved since 1980 be identified and valued?
- Will you include infrastructure assets prior to 1980?
- What personnel are qualified to make valuation estimates?
2. The Depreciation Approach doesn't value your preservation efforts
The depreciation approach may be less costly and easier to use than the modified approach, however, depreciation expense often fails to recognize the fiscal benefits of your ongoing preservation efforts. In addition, depreciation expense might be interpreted as an indication that your assets are being allowed to gradually deteriorate.
This can communicate an unacceptable message about your asset management strategy, whereas the modified approach provides a more meaningful gauge of your investment in the community's assets. However, this approach requires that you provide the information and documentation necessary to prove you are meeting GASB 34's modified requirements. Doing so requires that you can answer the following questions:
- How do you maintain an up-to-date inventory of your assets?
- How do you regularly assess the condition of your infrastructure?
- How do you calculate the annual cost to maintain your assets at a minimum condition level?
3. Accounting for community infrastructure is expensive & difficult
Without a doubt the greatest challenge for most compliance efforts is getting a handle on the quantity, location and condition of the assets under their jurisdiction. Rapid growth, poor documentation, physical proximity and agency turnover are all reasons why most organization only have a rough idea of how far their infrastructure truly extends. Challenges you'll likely face when attempting to value land improvements and many of your infrasturcture assets include:
- To what level of detail will you identify and value assets?
- What documentation will support asset identification and valuation?
- What time and resources are required to identify and value your assets?
How landlogic helps you overcome GASB 34 challenges
Landlogic is the fastest and easiest way to acquire and manage the data you need to meet all your GASB 34 requirements. In the next section we'll show you how your entire organization contributes the information necessary to build and maintain up-to-date inventories, keeps tabs on its condition, and accurately tracks maintenance costs.