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Requirements – GASB 51

Intangible assets and GASB 51 implementation

FPP G.007 makes it real

What’s lacking in physical substance, is nonfinancial in nature and has an initial useful life extending beyond one year?

If you answered, “That’s an intangible asset as defined by GASB 51!” chances are you're a state agency or institution of higher education financial professional well-versed in the capitalization and reporting of intangible assets.

Empty box representing intangible assets

If you answered with a hushed “Casper the Friendly Ghost?” it may be time for a quick look at the summary for the Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Financial Reporting for Intangible Assets. Issued in June 2007 and effective Sept. 1, 2009 (fiscal 2010), GASB 51 defines reporting requirements for intangible assets.

A go-to must-read

Agencies and institutions familiar and unfamiliar with the requirements of GASB 51 have an excellent resource to turn to for GASB 51 implementation guidance — the Fiscal Policy and Procedure (FPP) G.007, Accounting and Financial Reporting for Intangible Assets (GASB 51), issued by the Comptroller’s office in January 2010.

FPP G.007 has since undergone a complete update to provide even more in-depth guidance on how to incorporate the capitalization of intangible assets covered under GASB 51.

The updated FPP includes information on new and revised comptroller objects and definitions added to the Uniform Statewide Accounting System (USAS) and the Statewide Property Accounting (SPA) system to facilitate agency reporting of intangible assets. It also includes GASB 51 Frequently Asked Questions (FAQs) for agencies and institutions and select GASB 51 Questions and Answers (Q&As) from the GASB Comprehensive Implementation Guide.

Now that we know what defines an intangible asset — and have figured out Casper is both intangible and an asset to his community but not exactly what we're looking for — let’s get to what these assets really are.

Really unreal

The state of Texas possesses a variety of assets considered to be intangible under the guidance put forward by GASB 51, including:

  • Computer software: Internally developed or licensed software purchased from external sources
  • Land use rights: Easement, water, timber, mineral rights and other land use rights
  • Intellectual rights: Patents, trademarks and copyrights

Because GASB 51 does not apply to all intangible assets, FPP G.007 also lists intangible asset types not subject to GASB 51:

  • Assets acquired or created primarily for the purpose of directly obtaining income or profit
  • Assets resulting from capital lease transactions reported by lessees
  • Goodwill created through the combination of a government and another entity

ProjectONE is one

It may be an understatement to say FPP G.007 covers a lot of ground. Why is there so much information on GASB 51 implementation? Because intangible assets are by their very nature hard to grasp, with internally generated computer software probably the most ethereal of them all. Figuring out capitalization of such assets is also no easy task.

The Comptroller’s office knows this well in its lead role with ProjectONE (Our New Enterprise) — the Texas Enterprise Resource Planning (ERP) project that will create a “single set of books” for the state using a more user-friendly Web-based system.

PeopleSoft provides the base application, an off-the-shelf software product that's being modified to achieve the goals of ProjectONE. As such, it is a textbook example of an internally generated computer software intangible asset.

Why call it internally generated if it begins with a commercial product? Per GASB 51 and FPP G.007:

Intangible assets are considered internally generated if they are created or produced by the government or an entity contracted by the government, or if they are acquired from a third party but require more than minimal incremental effort on the part of the government to begin to achieve their expected level of service capacity.

That smartly fits our description of the modified PeopleSoft product for ProjectONE, but does FPP G.007 specifically address internally generated computer software?
From the FPP:

Computer software should be considered internally generated if it is created by agency employees or is purchased and then modified with more than minimal incremental effort.

FPP G.007 has plenty more DOs and DON’Ts of capitalization and reporting of internally generated computer software, including those related to software development phases through production and beyond. You'll also find guidance on capitalizing associated costs such as direct labor benefits allocations, data conversion and training.

Giving up the friendly ghost

For state agencies and universities, grappling with capitalization of and reporting requirements for intangible assets covered under GASB 51 is no easy task.

If you are an agency financial professional expert in such matters, you probably already know:

  • All intangible assets subject to the provisions of GASB 51 should be classified as capital assets and be reported on the government-wide statement of net assets only if they are identifiable. An intangible asset is identifiable when it is either separable (capable of being separable from the government) or arises from contractual or legal rights.
  • Assets developed/acquired before fiscal 2010 (Sept. 1, 2009) should be reported based on the previous capitalization thresholds (i.e. $5,000 for computer software). These assets will continue to be reported and amortized for the remainder of their useful life.
  • Assets developed/acquired during fiscal 2010 are subject to the revised capitalization thresholds (i.e. $100,000 for purchased computer software).

For those who whispered “Casper?” when asked to identify an intangible asset, no worries. Discover your outside voice and everything you need to know about intangible assets and GASB 51 implementation with (FPP) G.007, Accounting and Financial Reporting for Intangible Assets (GASB 51).

Getting to know you

If your eyes are rolling back in your head and you're feeling the overwhelming urge to seek out some light reading, just remember the mysteries of GASB 51 implementation are yours to unlock in FPP G.007.

Here’s an at-a-glance look at what the FPP covers:

  • An overview of the requirements of GASB 51
  • GASB 51 effective date
  • Transition requirements for assets obtained before and during fiscal 2010
  • Scope and applicability of GASB 51, including exclusions
  • Classification and recognition of intangible assets subject to GASB 51
  • Internally generated intangible assets, such as computer software
  • Amortization of intangible assets
  • USAS information
  • SPA information
  • GASB 51 FAQs for agencies/institutions of higher ed.
  • GASB 51 Q&As from the GASB Comprehensive Implementation Guide

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Susan Combs
Texas Comptroller of Public Accounts
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