the Accounting and Financial Reporting

The GASB Statement No. 51 is also known as the Accounting and Financial Reporting for Intangible Assets. The Statement was issued on July 10, 2007, but will be effective for financial statements reporting for periods after June 15, 2009 (Governmental Accounting Standards Board, 2007). The Governmental Accounting Standards Board says that the primary aim this statement includes providing users of financial statements with a “more complete and comparable information” regarding intangible assets.

The GASB adds that the Statement improves financial reporting by reducing inconsistencies in accounting and financial reporting for intangible assets by clarifying that such assets should be classified as capital assets. The GASB also sees that the Statement promotes “greater comparability” among financial statements of government units and results in a more credible representation of the service capacity of intangible assets, as well as the periodic cost associated with the usage of such, and ultimately, the financial position of these units (Governmental Accounting Standards Board, 2007).

According to the GASB Project Page on this Statement, the GASB conducted a survey on existing practice on intangible asset reporting in 2004. The GASB staff analyzed the responses and later affirmed that there were differences in accounting and financial reporting of intangible assets. Glenn Cheney at Web CPA adds that the inconsistencies came after the GASB issued Statement No. 34, guidelines for State and Local governments. Cheney explains that it overhauled governmental accounting and capitalized intangible assets.

The Statement was, however, silent on the definition of intangible assets, as well as reportorial procedures (Cheney, 2007). As a result, part of the project’s initial mandate was to provide a clear criteria for recognition of intangible assets, basis of measurements, classification as capital or non-capital assets, among other things. (Governmental Accounting Standards Board, 2007). The Statement affects and amends GASB Statement No. 34, paragraph 19 and paragraph 21, and GASB Statement No. 42, paragraph 9e, paragraph 16, and paragraph 18.

It is currently not affected by any other GASB pronouncements (Governmental Accounting Standards Board, 2007). The GASB Statement No. 51 expands on the reporting requirements regarding intangible assets as stated in GASB Statement No. 34. It, in fact, clarifies just what an intangible assets really is, and what should be the method of reporting regarding different kinds of intangible assets (Governmental Accounting Standards Board, 2007). GASB Statement No. 51 defines intangible assets as nonfinancial assets, which lacks physical substance and has an initial useful life of more than one reporting period (Deloitte, 2007)

Glenn Cheney, writing for WebCPA, states that the following are included as intangible assets: ? easements, ? internally generated and third-party computer software, ? water and timber rights, ? patents, and ? trademarks. According to Christopher Ray (2007), since all intangible assets subject to this statement are to be classified as capital assets, then, the existing rules related to capital assets should be applied to intangible assets as set forth in both GASB Statements No. 34 and No. 42.

Ray also explains that the only scope exceptions will be those intangible assets acquired or produced mainly for directly making income or profit, or those assets that result from capital lease transactions reported by lessees, or goodwill that came from the combination of a government or other entities. The Statement also provides that an intangible asset should only be recognized if it is “identifiable”, like when it can be separated, sold, transferred, etc. , or, if it arose from legal rights (Ray, 2007). Apart from these, GASB Statement No.

51 also provides that established specified conditions to recognizing intangible assets that are internally generated, provided guidance on recognizing internally-generated computer software, and provided specific guidance for the intangible assets amortization (Ray, 2007). Since Statement No. 51 is an expansion of the earlier Statement 34, the statement will be affecting net assets and capital assets. From my understanding, footnote disclosures would include statements as to how one classifies a certain asset as an intangible asset covered by the statement.

As prime example could be seen in Hudson Yards Infrastructure Corporation’s annual report for the year ended June 30, 2007. In its notes, the company indicated that its lone intangible asset was not covered by the Statement since it was acquired for directly obtaining income and is not covered by the GASB Statement 51.

References 2007. Accounting Roundup. Deloitte. Retrieved on 27 March 2008. <http://www. iasplus. com/usa/roundup/07q3. pdf> 2007. GASB Issues Standard on Intangible Assets. Governmental Accounting Standards Board. Retrieved on 27 March 2008 <http://www. gasb. org/news/nr071007. html>. 2007.

Project Pages – Intangible Assets. Governmental Accounting Standards Board. Retrieved on 27 March 2008. <http://www. gasb. org/project_pages/intangible_assets. html> Cheney, Glenn. 2007. GASB gets a grip on intangibles. WebCPA Retrieved on 27 March 2008. <http://www. webcpa. com/article. cfm? articleid=25068&searchTerm=intangible&print=yes> Hudson Yards Infrastructure Corporation Annual Report. Retrieved on 27 March 2008. <http://www. nyc. gov/html/hyic/downloads/pdf/hyic_07_annualreport. pdf> Ray, Christopher B. (2007. ) Accounting and Financial Reporting for Intangible Assets. KPMG LLP. Retrieved on 27 March 2008.