Question

1.what is Pension accounting issues in the private vs. public sector
2. what is the Accounting for works of art and historical treasures in fund and government-wide statements when purchased and received as gifts
3. what is the Depreciation rules for works of art and historical treasures
4.what is Accounting for infrastructure assets in fund and government-wide financial statements
5. what is Depreciation rules for infrastructure assets

Answer 1

1.Public sector pensions: pension reform requires trade-offs—tough trade offs. Governments have largely promised government workers defined-benefit pension plans, which guarantee a regular pension payment for the rest of government retirees’ lives. Because they are guaranteed, taxpayers are on the hook regardless of how well government and the employees contribute or how well the market performs.

Private sector pensions: private sector workers generally save for retirement with 401-k style retirement accounts based on what they and their employer contribute and market returns. In other words, private sector employees are responsible for their own retirement savings.

2. GASB Statement 34 states that governments should capitalize works of art, historical treasures, and similar assets at their historical cost or fair value at the date of donation (estimated if necessary) if they are held as a collection. This exemption does not apply to collections already capitalized as of June 30, 1999, and all future additions to these collections, even if they meet the above conditions for exemption from capitalization.

Depreciation Rule:

If collections are not capitalized, then they will also not be depreciated. When collections are capitalized, the following criteria applies for depreciation. Statement 34 states that capitalized collections which are exhaustible, such as exhibits whose useful lives are diminished by display or educational or research applications, should be depreciated over their estimated useful lives. The paragraph also states that depreciation is not required for collections which are inexhaustible. For those collections that are capitalized and depreciated, note disclosures should be made to provide detail about any such collections reported in the statement of net assets, divided into major classes, as well as between those associated with governmental activities and those associated with business-type activities. Also, the disclosures should include (1) beginning and end-of-year balances, with accumulated depreciation

3. Depreciation Rule

Exhaustible collections or items are items whose useful lives are diminished by display, educational or research applications. Exhaustible collections are depreciated. Inexhaustible items are not depreciated.

All works of art and historical treasures acquired by or donated to the state are capitalized unless held for financial gain.

• Record acquired works of art and historical treasures at historical cost
• Record donated works of art at acquisition value (per GASB 72, paragraph 79) at the time of donation.
• Collections already capitalized as of June 30, 1999, remain capitalized and all additions to those collections are capitalized, even if they meet the conditions for exemption from capitalization.

4. Governmental entities are required to present their government-wide financial statements on the accrual basis of accounting .

Depreciation on infrastructural assets should not be allocated to the various functions, but should be reported as a direct expense of the function that the reporting government normally associates with capital outlays or as a separate line in the statement of activities.

5. The modified approach is an alternative to reporting depreciation for infrastructure assets that meet the following criteria:

• The assets are managed using a qualifying asset management system
  –AND–
• Documentation shows the assets are being preserved at or above a condition level established by the state

Depreciation is not reported for infrastructure assets reported using the modified approach. Only infrastructure assets that comprise a network or subsystem of a network can be reported using the modified approach.