In government-wide statements, how are capital assets treated?

• A. Expensed when purchased.
• B. Depreciated.
• C. Not reported.
• D. Only reported upon disposal.

Answer: (B)

In government-wide statements, capital assets are shown using accrual accounting as long-lived assets that are depreciated over their estimated useful lives. This means the cost of an asset is allocated as an expense over the periods that benefit from it, and the asset remains on the balance sheet net of accumulated depreciation. Recording depreciation aligns the expense with the period’s use of the asset and provides a more accurate picture of the government’s net position. Expensing a asset immediately would ignore future benefits and understate assets; not reporting them or only reporting on disposal would miss their ongoing value. The usual rule is depreciation, with a possible exception for infrastructure under the modified approach if specific criteria are met, but in general capital assets are depreciated.