GASB looks to add new infrastructure assets disclosures

The Governmental Accounting Standards Board has requested comment on a proposal that would add additional disclosure items related to infrastructure assets to issuers’ financial statements, a move that hopes to reexamine how such assets are recognized and measured and how issuers should go about reporting them.

Joel Black, chair of the GASB said in an interview with The Bond Buyer that the two most significant changes in the proposal are the requirement to periodically review the estimated useful lives if the specific government is using the depreciation method for capital assets. While the other would separate a part of the infrastructure asset if it has a different useful life than the rest of it.

“For example, the base of a road has a very different useful life than the surface of the road and in that case, this requirement would make the governments componentize those into two different assets and depreciate them over their different useful lives,” Black said. “Some governments already do both of those so for them, it won’t be a big change. But for others, those two things would necessitate some significant changes to the way they track and account for their infrastructure.”

The proposal includes four new note disclosures, the first of which would force governments to “disclose in their summary of significant accounting policies changes in their policy for capitalizing infrastructure assets or estimating the useful lives of infrastructure assets used to calculate depreciation,” GASB said. “Second, for infrastructure assets reported using historical cost net of accumulated depreciation, governments would disclose the historical cost of infrastructure assets by major class that have exceeded 80% of their estimated useful lives.”

The third additional disclosure would have governments disclose maintenance or preservation expenses related to their infrastructure assets, with the fourth additional disclosure being including an issuers’ policy for monitoring or preserving infrastructure assets in its summary of significant accounting policies.

The board began conducting research on capital assets in 2019, where it found that “the accounting for capital assets was working well, except as it related to specific infrastructure assets,” Black said. “Users really thought that the carrying value on the face of the financial statements for infrastructure assets wasn’t always very reflective of the condition of those assets and they wanted more information about how a government was maintaining their infrastructure assets.”

Comments on this proposal are due by Jan. 17, 2025, and after that, GASB expects to issue an exposure draft based on the comments received in early 2026, a final standard in early 2027 and a final effective date at least a year after that.

“We’ve worked to try and find the balance of providing as good information as we can to users while minimizing the increased burden to issuers or preparers of financial reports,” Black said. “But I do expect there will be some cost and there will be some effort that is required for issuers or preparers to change their processes. Some of it depends on how much they do already related to these things.”