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Under GASB Statement No. 34, Local Governments are
required to depreciate capital assets, a process that includes determining the
historical cost of assets. The research process can be separated in three
distinct segments.
First, we gather and review as many documents as possible. Our goal is to
quickly identify assets for which actual historical costs exist, and to set
aside documents we could use later to establish estimated historical costs. The
records we review include land deeds, insurance documents, appraisals, purchase
orders, and any other pertinent documents.
Second, we gather and develop additional information using other sources and
methods as needed. This includes inspecting structures, measuring buildings and
improvements (parking lots, fences, sidewalks, stadiums, playgrounds, etc.) as
necessary, and discussions with staff personnel.
Third, when actual costs are unavailable, we will back-trend documented
replacement costs to arrive at a defensible estimated historical cost upon
which depreciations can be based. When necessary, we will use industry-standard
techniques to establish current replacement costs. This approach is acceptable
under GASB #34 guidelines.
(Example: A building is known to have been built in 1982 (from the plaque at
the entrance), but there are no documents reflecting the actual cost paid. From
insurance documents we learn that the replacement value of the building was
$100,000.00 as of 1999. Using the Marshall & Swift Valuation System to back
trend the cost to 1982, we calculate the estimated historical cost of the
building to be $64,979.76).
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