Asset Impairment Reporting

Agency: Construction Management Office

As part of compiling the State’s financial statements for the fiscal year ending June 30, the auditors must examine any known asset impairment of a state building as June 30.  The State Auditor’s Office (SAO) is charged with preparing the State’s financial statements as of fiscal year end in accordance with generally accepted accounting principles (GAAP).  For governments, GAAP is primarily determined by standards set by the Governmental Accounting Standards Board (GASB).  GASB has issued Statement No. 42 entitled ‘Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries.’

This statement further defines asset impairment as a ‘significant, unexpected decline in the service utility of a capital asset.’  The service utility of a capital asset is the usable capacity that at acquisition was expected to be used to provide service, as distinguished from the level of utilization, which is the portion of the usable capacity currently being used.

Impairment is indicated when events or changes in circumstances suggest that the service utility of the capital asset may have significantly and unexpectedly declined.  Common indicators of impairment include:

  • Evidence of physical damage, such as for a building damaged by fire or flood, when the level of damage is such that restoration efforts are needed to restore service utility.
  • Enactment or approval of laws or regulations or other changes in environmental factors, such as new water quality standards that a water treatment plant does not meet (and cannot be modified to meet).
  • A change in the manner or expected duration of use of a capital asset, such as closure of a school prior to the end of its useful life.
  • Construction stoppage, such as stoppage of construction of a building due to lack of funding.

The statement provides that, absent the prominence of events or changes in circumstances affecting a capital asset that may indicate impairment, governments are not required to perform additional procedures to identify potential impairment of capital assets beyond those already performed as part of their normal operations.  This is to say that events or circumstances that may indicate impairment generally are expected to have prompted discussion by the governing board, management, or the media.

Also, if you can provide results and status of the issues at the Penitentiary in Rawlins.

In summary, if you could provide any details, to the best of your knowledge, as to whether any state owned building was knowingly impaired as defined here, as of June 30, it would be greatly appreciated.

We are requesting this information be provided no later than August 15.

Thank you for your assistance in the production of the State’s Annual Comprehensive Financial Report.  If there are any questions, please contact the SAO Accounting Division at (307) 777-2460 or by email at