Governments that own capital-type assets that (1) were acquired for resale, (2) are not held as investments, and (3) are not reported as capital assets, should prepare for the likelihood that they will need to change their accounting going forward. Luckily, many such assets currently held may be sold before any forthcoming pronouncement on the topic would become effective.
Governments can take this opportunity to review their acquisitions of capital-type assets for resale, consider the impact of reporting these as capital assets, and ready themselves for potential ongoing discussions on this topic.
A change in reporting would cause fluctuations in the governmental funds flows statement. Capital assets are not reported in governmental funds. If the asset acquired for resale was purchased by a governmental fund, the acquisition would be reported as an expenditure in the year acquired. The subsequent sale proceeds would be reported as another financing source in the year of sale.
Using current accounting policies, governments should review the valuation of real estate purchased for resale and whether the result is a representationally-faithful measurement of these capital assets.
- Publication date: June 2025
- Authors: Michele Mark Levine and Susannah Filipovic