Governmental Accounting: Financial Reporting Process

Question 1

How are investments in marketable securities reported?

Answer 1

Marketable securities are always recorded at FV in governmental accounting. Changes in market value are reported as unrealized gains and losses

Question 2

A government pays $120,000 on a long-term liability. Of this amount, $100,000 is paid to reduce the principal with the remaining $20,000 as interest.

What j/e or entries are made to report this payment?

Answer 2

Fund-Based F/S

Expenditures-bond principal 100,000
Expenditures-interest 20,000
Cash 120,000

Government-wide F/S

Bond Payable 100,000
Interest expense 20,000
Cash 120,000

Question 3

Some of the governmental funds record their budget within the financial records through a budgetary entry.

When is a budgetary entry recorded?

What happens to the budgetary entry after it is entered into the records?

Answer 3

A budgetary entry is recorded at the very beginning of the fiscal year to indicate the budgetary decisions that have been made by elected officials and to provide a control mechanism for spending.

The budgetary entry simply remains on the books throughout the period and is reversed from the books at the end of the year.

Question 4

Assuming that a balanced budget has been passed, what is the typical budgetary entry for a Governmental Fund?

Answer 4

when a balanced budget has been approved, the budgetary entry would be as follows

Estimated revenues XXXX
Estimated other financing sources XXXX
Appropriations XXXX
Estimated other financing uses XXXX

appropriations refer to the amount of approved expenditures for the upcoming period

Question 5

A city passes a budget that is not balanced and is now making its budgetary entry. How is the entry made to balance?

Answer 5

When the budget is not balanced, a budgetary fund balance account must be included in the budgetary entry to indicate that the size of the fund balance is expected to increase or decrease during the period. A debit to the budgetary fund balance indicates that a deficit is anticipated, whereas a credit to the budgetary fund balance reflects an expected surplus for the period.

Question 6

The term interperiod equity is often used in connection with government budgets that are not in balance. What is the meaning of this term?

Answer 6

Interperiod equity indicates whether current resources will be sufficient to pay for current expenditures so that future periods are not affected by current decisions. IF a deficit is anticipated people in future periods will have to pay for the expenditures of the current period when the debt is paid. Conversely, if a surplus is expected, revenues raised in the current period will be used for future expenditures. That shifting of the financial burden from one period to another is known as interperiod equity.

Question 7

Commitments are frequently recorded within the government funds.

Which commitments are most likely to be recorded?

What are these commitments called?

What entry is made to record a commitment?

Answer 7

Commitments are often recorded in the Government Funds to help prevent overspending. Commitments are most often recorded when a purchase order has been placed or when a contract has been signed.

In government accounting, these types of commitments are referred to as encumbrances.

Encumbrances XXXX
Fund balance reserved for encumbrances XXXX

Question 8

In producing fund-based F/S, what j/e or entries are needed for the following:

On Monday, a truck is ordered by a city and an encumbrance is recorded for $31,200. On Friday, the truck is received at an actual cost of $31,600.

Answer 8

Monday

Encumbrance 31,200
Fund balance reserved for remembrances 31,200

Friday

Fund balance reserved
for remembrances 31,200
Encumbrance 31,200
Expenditure 31,600
Accounts payable 31,600

Capital assets are not recorded on the fund-based F/S for the governmental Funds

Question 9

When ordered, a city recorded an encumbrance of $12,000 for the purchase of Furniture. By the end of the year, the furniture had not been received. The city has agreed to honor the commitment when the furniture arrives. On the fund-based balance sheet at year-end, how is this commitment reported? How does it affect the government-wide statements?

Answer 9

Fund-based F/S

If an encumbrance has not been filed by the end of the year, but will still be honored, the fund balance reserved for encumbrances balance remains open and is reported in the fund equity section of the balance sheet. This figure shows that a portion of the current financial resources must be held to pay off the commitment

Government-wide F/S

Commitments are not recorded on the government-wide F/S so the outstanding balance is not reported.

Question 10

When recording the Governmental funds, reductions in current financial resources are recorded as expenditures on the fund-based F/S in three cases. What are these three cases?

Answer 10

1. the acquisition of a capital asset or other asset that does not qualify as a current financial resource
2. the incurrence of a period cost
3. payment of a long-term liability

Question 11

On fund-based F/S, when is an expenditure recorded initially?

Answer 11

An expenditure is recorded initially when a claim is established that reduces the financial resources currently being held by the fund. In many cases, that is simply when a legal liability is created.

Question 12

On fund-based F/S, expenditures can be classified a number of different ways for reporting purposes. In what ways can expenditures be classified?

Answer 12

Function

Unit

Activity

Character

Object

Question 13

In producing fund-based F/S for the governmental funds, some expenditures cause a reduction in current financial resources because of the acquisition of capital assets. What j/e or entries are recorded in such cases?

Answer 13

Fund-based F/S

in the governmental fund making the acquisition, the following entry is made

expenditures XXXX
Vouchers payable XXXX

no capital asset is recorded in the governmental funds when preparing fund-based F/S. However the capital asset appears in the government-wide F/S and is depreciated over its useful life.

Question 14

Assume that a governmental fund makes an expenditure relating to its infrastructure, What is an infrastructure asset?

Answer 14

An infrastructure asset is any capital asset that is normally stationary in nature and can usually be preserved for a significantly greater number of years than most capital assets. Example include roads, bridges, tunnels, curbing and sidewalks.

Question 15

A city spends $100,000 for a sidewalk.

What is reported on the fund-based F/S?

What is reported on the government-wide F/S?

Answer 15

On the fund-based F/S, an expenditure of $100,000 will be reported on the statement of revenues, expenditures and changes in fund balance.

On the government-wide F/S, a capital asset of $100,000 will be reported on the statement of net assets.

Question 16

A police department is being reported within the General Fund of a city. On the first day of Year 1, a police car is bought for $60,000 with a ten–year expected life. On the first day of Year 2, this same car is sold for $55,000.

How is this sale reported on both the government-wide and fund-based F/S?

Answer 16

On the government-wide f/s, the assumption will be made her that the car is depreciated by $6,000 during the first year so that the book value is now $54,000. Thus, when the sale is made for $55,000, a $1,000 gain is shown on the statement of activities.

On the fund-based F/S for the governmental funds, capital assets are not reported, therefore there is not asset to remove. A “Revenue from sale of police car” of $55,000 is reported.

Question 17

For recognition purposes, governments divide all non-exchange transactions into four different classifications. What are these four classifications?

Answer 17

Derived tax revenue

imposed non-exchange revenues

government-mandated non-exchange transactions

voluntary non-exchange transactions

Question 18

What is the definition of derived tax revenue?

What are examples of a derived tax revenue?

When should a derived tax revenue be recognized?

Answer 18

a derived tax revenue is a tax assessment that is imposed on an underlying transaction

income taxes and sales taxes are the most common examples of derived tax revenues. earning the income and making the sale are the underlying transactions

for derived tax revenues, the asset and the revenue are both recognized when the underlying exchange occurs. For example, when the sale happens, the government should be recognized the sales tax that is assessed on the transaction.

Question 19

What is the definition of an imposed non-exchange revenue?

What are examples of an imposed non-exchange revenue?

When should an imposed non-exchange revenue be recognized?

Answer 19

an imposed non-exchange revenue is a government tax that is assessed, although there is no underlying transaction

property taxes as well as fines and penalties are common examples of imposed non-exchange revenues

For imposed non-exchange revenues, the asset is recognized when received or when there is an enforceable claim. The revenue is recognized when the resources are required to be used or the first period when use is permitted. For property taxes, revenue is recognized in the period for which the tax is levied.

Question 20

What is the definition of a government-mandated non-exchange transaction?

What is an example of a government-mandated non-exchange transaction?

When should a government-mandated non-exchange transaction be recognized?

Answer 20

A government-mandated non-exchange transaction occurs when one government makes a requirement of another government and then provides part of the funding to fulfill this requirement.

For example, if a state government requires a city to clan up its river and then awards a grant to aid in this work this conveyance is a government-mandated non-exchange transaction.

In a government-mandated non-exchange transaction, both the asset and the revenue are recognized when all eligibility requirements have been met. If the money is conveyed prior to that time, the cash is recognized along with a deferred revenue.

Question 21

What is the definition of a voluntary non-exchange transaction?

What are examples of a voluntary non-exchange transaction?

When should a voluntary non-exchange transaction be recognized?

Answer 21

A voluntary non-exchange transaction is money conveyed willingly to a government by an individual, corporation, organization, or other government.

Most grants would be examples of voluntary non-exchange transactions, as would be gifts made to the government.

In a voluntary non-exchange transaction, both the asset and the revenue are recognized when all eligibility requirements have been met. if the money is conveyed prior to that time, cash is recognized along with a deferred revenue. Voluntary and government-mandated non-exchange transactions are recorded in this same manner.

Question 22

A grant from the state for $70,000 is received by a city to supplement the salaries of local police officers. However, as an eligibility requirements, the money must be spent in the designated fashion. During the current year, $17,000 of this amount is properly spent.

For fund-based f/s, what entries are made?

Answer 22

when money is received

cash 70,000
Deferred revenue 70,000

when a portion of the money is properly spent (eligibility requirement is met)

expenditures 17,000
deferred revenue 17,000
Cash 17,000
Revenue 17,000

Question 23

A grant from the state for $70,000 is received by a city to supplement the salaries of local police officers. However, as an eligibility requirements, the money must be spent in the designated fashion. During the current year, $17,000 of this amount is properly spent.

For government-wide f/s, what entries are made?

Answer 23

when money is received

cash 70,000
Deferred revenue 70,000

when a portion of the money is properly spent (eligibility requirement is met)

Salaries expense 17,000
deferred revenue 17,000
Cash 17,000
Revenue 17,000

Question 24

A city decides to spend $3 million to build a new fire station. During year 1, the city spends a total of $700,000.

How is this amount reported on both the government-wide and fund-based F/S?

Answer 24

on government-wide F/S within the governmental activities, the city reports a capital asset such as “Building in progress” for $700,000

on fund-based F/S for the capital projects fund, the city reports an expenditure for a capital outlay of $700,000

Question 25

A 10 year bond payable is issued at face value by a city for $3 million to finance construction of a new fire department.

What j/e or entries should be recorded for this issuance?

Answer 25

Fund-based F/S

cash 3,000,000
Other financing sources 3,000,000

Government-wide F/S

cash 3,000,000
Bond payable 3,000,000

Question 26

At the beginning of the current year, a city borrows $800,000 on a 90-day note to fund operations until property taxes are collected?

What j/e or entries should be reported?

Answer 26

Fund-based F/S

cash 800,000
Tax anticipation notes payable 800,000

Government-wide F/S

Cash 800,000
Tax anticipation notes payable 800,000

Question 27

What is an interfund transaction?

Answer 27

An interfund transaction is a transfer between or within funds.

Question 28

A school system is being reported by a city within its General Fund. The government also has a print shop that is reported as an internal service fund. The print shop does $3,000 worth of work for the school system, and the money is transferred within the government.

What kind of transfer is this, and how is the transfer recorded?

Answer 28

Work is being done here by one part of the government for another. This is known as an internal exchange transaction. Because work was done, this type of transaction is recorded in the same manner as it would be if the transaction had been with a party outside of the government. Hence, the general fund records an expenditure of $3,000, whereas the internal service fund reports a revenue of $3,000.

Question 29

A general fund starts the year with a budget as follows:

Estimated revenues - 4,000,000
Expenditures - 3,700,000
Budgetary fund balance - 300,000

During the year, the following amounts were reported:

Revenues - 4,100,000
expenditures - 3,500,000
other financing sources - 100,000
other financing uses - 300,000

by how much did fund equity change during the year?

Answer 29

the budget figures are put on the book at the beginning of the year and then removed at the end so that they have no impact on fund equity

of the actual transactions, the following measure the inflow of financial resources and cause fund equity to rise: Revenues of 4,100,000 and other financing sources of 100,000, for a total of 4,200,000

the following transactions measure the outflow of financial resources and cause the fund equity to fall: expenditures of 3,500,000 and other financing uses of 300,000, for a total of 4,200,000

thus, fund equity increased by a net 400,000 during the year (4,200,000 coming in less 3,800,000 going out)

Question 30

A governmental fund sings a lease on a truck that meets the criteria for a capitalized lease. The lease is signed on Jan 1, of year 1 and calls for five annual payments of 20,000 beginning on Dec 31 of Year 1. The PV of these payments on an interest rate of 10% is $71,000.

What j/e or entries are made when the lease is signed?

Answer 30

fund-based F/S

expenditures 71,000
other financing sources 71,000

government-wide F/S

leased truck 71,000
lease obligation 71,000

Question 31

A governmental fund sings a lease on a truck that meets the criteria for a capitalized lease. The lease is signed on Jan 1, of year 1 and calls for five annual payments of 20,000 beginning on Dec 31 of Year 1. The PV of these payments on an interest rate of 10% is $71,000. At the date that the lease is signed, the appropriate entry is made.

What j/e or entries are made on Dec 31 if fund-based F/S are being prepared?

Answer 31

the interest for the period is 7,100 the remaining 12,900 of the 20,000 payment is a reduction in principal

at the end of the year the following entry is needed:

expenditures - interest 7,100
expenditures - debt payment 12,900
Cash 20,000

Question 32

A governmental fund sings a lease on a truck that meets the criteria for a capitalized lease. The lease is signed on Jan 1, of year 1 and calls for five annual payments of 20,000 beginning on Dec 31 of Year 1. The PV of these payments on an interest rate of 10% is $71,000. At the date that the lease is signed, the appropriate entry is made.

What j/e or entries are made on Dec 31 if government-wide F/S are being prepared?

Answer 32

the interest for the period is 7,100 the remaining 12,900 of the 20,000 payment is a reduction in principal

at the end of the year the following entry is needed:

depreciation expense 14,200
interest expense 7,100
lease obligation 12,900
Accumulated depreciation 14,200
Cash 20,000

Question 33

In government accounting, in what situations is depreciation expense reported?

Answer 33

Depreciation expense is reported in 2 cases:

1. government-wide F/S for both the governmental activities and the business-type activities
2. Fund-based F/S for the proprietary funds

Question 34

During year 1, a governmental fund pays $600 for supplies or for a prepaid cost such as rent or insurance. By the end of the year, $130 of this amount has been used.

On government-wide F/S, what will be reported for year 1?

Answer 34

On government-wide F/S the amount of the asset that has been used up ($130) will be shown as an expense. The cost that remains ($470) is shown as an asset

Question 35

At the end of this year, the city’s police officers earned vacation time worth $60,000. It is probable that these officers will take their vacation the subsequent period. Of the total, only $8,000 is expected to be taken early enough in the next year to require the use of the current financial resources held at the end of this year. The remaining $52,000 will be taken much later in the year. The police department is being reported within the general fund.

What adjusting entry is needed at the end of the year to record this liability?

Answer 35

fund-based F/S

expenditures 8,000
vacation liability 8,000

government-wide F/S

vacation expense 60,000
vacation liability 60,000

Question 36

A city has a solid waste landfill where its citizens can leave their trash.

In what two funds could this landfill normally be reported?

Answer 36

If a sold waste landfill has a charge for its use, it is frequently recorded within an enterprise fund.

If a solid waste landfill is free for public use, it is most likely recorded within the general fund.

Question 37

A city has a landfill that it expects to take ten years to fill, at which point it will cost $600,000 to clean to meet federal government regulations. At the end of the first year it is 8% filled, and at the end of the second year the site is 21% filled. A first $5,000 payment toward cleanup is made at the end of Year 1.

This landfill is being accounted for as an Enterprise Fund, so accounting will be the same for fund-based F/S and government-wide F/S.

What recording is made at the end of the first year and at the end of the second?

Answer 37

At the end of the first year, the site is 8% complete so that $48,000 must be recognized (8% of $600,000)

expense to clean landfill 48,000
landfill liability 48,000

The first payment then reduces this liability by $5,000.

At the end of second year, the site is 21% complete so that a total expense of $126,000 should be recognized (21% of $600,000). Because $48,000 was recognized in year 1, another $78,000 is needed:

Expense to clean landfill 78,000
landfill liability 78,000

Question 38

A city has a landfill that it expects to take ten years to fill, at which point it will cost $600,000 to clean to meet federal government regulations. At the end of the first year it is 8% filled, and at the end of the second year the site is 21% filled. A first $5,000 payment toward cleanup is made at the end of Year 1.

This landfill is being accounted for as a General Fund. In government-wide F/S, What recording is made at the end of the first year and at the end of the second?

Answer 38

At the end of the first year, the site is 8% complete so that $48,000 must be recognized (8% of $600,000)

expense to clean landfill 48,000
landfill liability 48,000

The first payment then reduces this liability by $5,000.

At the end of second year, the site is 21% complete so that a total expense of $126,000 should be recognized (21% of $600,000). Because $48,000 was recognized in year 1, another $78,000 is needed:

Expense to clean landfill 78,000
landfill liability 78,000

Question 39

How are budgetary figures reported in a government’s comprehensive annual financial report?

Answer 39

the following budget information must be reported by a primary government for its general fund and any major fund within the special revenue funds:

original budget amounts
amended budget amounts
actual amounts

this information is presented as required supplemental information after the notes to the F/S. It can also be presented as a separate statement within the fund-based F/S.

Question 40

How do encumbrances impact government-wide F/S?

Answer 40

Encumbrances only impact individual funds. Therefore, encumbrances are not reported as part of government-wide F/S. However, if still outstanding at year-end, encumbrances are mirrored on the fund-based F/S for the governmental funds by showing a part of the fund balance as reserved for encumbrances.

Question 41

In producing government-wide F/S, what j/e or entries are needed for the following.

On Monday, a truck is ordered by a city and an encumbrance is recorded for $31,200. On Friday, the truck is received at an actual cost of $31,600.

Answer 41

On government-wide F/S, neither encumbrances nor expenditures are reported. Instead, the asset itself is recorded.

Truck 31,600
Accounts payable 31,600

Question 42

Where are infrastructure assets reported?

Answer 42

they are reported as capital assets on the government-wide financial statements and capitalized

Spending on infrastructure is reported as an expenditure for fund-based financial statements

Question 43

How are infrastructure assets depreciated on government-wide financial statements?

Answer 43

infrastructure assets can be depreciated like any other capital asset over their estimated useful lives.

however, as an option, a modified approach can be utilized for infrastructure assets. in that case, maintenance expense is recorded in lieu of depreciation. If the modified approach is used, no depreciation need be reported.

Question 44

If the modified approach is used for infrastructure assets, no depreciation expense need be reported. How is the modified approach applied?

Answer 44

1. a network or a subset of a network of infrastructure items must be identified. For example, all roads would be a network, while county roads would be a subset of a network
2. a minimum acceptable condition level for that network or subset is identified
3. the government must have a management system in place to ensure that the acceptable condition level is maintained.

Question 45

Government officials transfer $100,000 of unrestricted funds from the general fund to the capital projects funds.

For fund-based F/S, what j/e are made?

Answer 45

General fund

other financing uses 100,000
Cash 100,000

Capital Projects funds

Cash 100,000
other financing sources 100,000

this transaction is an interfund transfer that would not appear in the government-wide F/S

Question 46

Government officials transfer $100,000 of unrestricted funds from the General Fund to an Enterprise Fund.

For government-wide F/S, what j/e are made?

Answer 46

Government Activities

Transfer-out 100,000
Cash 100,000

Business-type activities

Cash 100,000
Transfer-in 100,000

Both transfer balances would be shown on the statement of activities but would then be offset in arriving at figures for the government as a whole.

Question 47

A proprietary fund signs a capitalized lease for a piece of equipment.

What is the difference between how this event is reported on fund-based F/S and government-wide F/S?

Answer 47

There is no difference between the reporting of a lease by a proprietary fund for fund-based F/S and for government-wide F/S. For the proprietary funds, there is very little difference in the information that is reported on these two sets of statements.

Question 48

During year 1, a governmental fund pays $600 for supplies or for a prepaid cost, such as rent or insurance. By the end of the year, $130 of this amount has been used.

On fund-based F/S, what are the two possible ways by which this cost can be accounted?

Answer 48

on fund-based F/S prepared for the governmental funds, supplies and prepaid costs can be accounted for by either of two methods:

1. Consumption method - records the expenditure as the asset is being consumed
2. Purchases method - records the expenditure when the item is first acquired, because that is when current financial resources are reduced.

Question 49

During year 1, a governmental fund pays $600 for supplies. By the end of the year, $130 of this amount has been used.

On fund-based F/S, what j/e are recorded if the consumption method is being used?

Answer 49

j/e when acquired

supplies 600
cash 600

j/e as supplies are used

expenditures-supplies 130
supplies 130

Question 50

During year 1, a governmental fund pays $600 for supplies. By the end of the year, $130 of this amount has been used.

On fund-based F/S, what j/e are recorded if the purchases method is being used?

Answer 50

j/e when acquired

Expenditures- supplies 600
cash 600

j/e as supplies are used

Supplies 130
Fund balance - reserved for supplies 130

Question 51

A city has a landfill that it expects to take ten years to fill, at which point it will cost $600,000 to clean to meet federal government regulations. At the end of the first year it is 8% filled, and at the end of the second year the site is 21% filled. A first $5,000 payment toward cleanup is made at the end of Year 1. No other payments are expected for several years.

This landfill is being accounted for as a General Fund.

In Fund-based F/S, What recording is made at the end of the first year and at the end of the second?

Answer 51

In fund-based F/S for a governmental fund, the only entry is for the $5,000 reduction in current financial resources that takes place at the end of year 1.

Expenditures - landfill cleanup 5,000
cash 5,000

no long-term liabilities are shown in the fund-based F/S for the governmental funds.

Question 52

A city buys an artwork or museum piece for $10,000 or receives the item as a donation.

In preparing government-wide F/S, the city must record the piece as an asset unless it meets what three requirements?

Answer 52

on government-wide F/S, artwork and museum pieces need not be capitalized if they meet these 3 criteria:

1. used for public exhibition, education, or research
2. The property is protected and preserved
3. There is a policy that the proceeds of any sale will be used to buy other items for the collection

if capitalization is not chose, the entry is:

Expense 10,000
Cash 10,000

Item received by donation

Expense 10,000
Revenue 10,000

Question 53

A government receives an artwork or museum piece either by acquisition or donation. the government donation. The government decides to record the property as an asset.

Is depreciation required of this asset?

Answer 53

An artwork or museum piece that is capitalized at its cost or FV must be depreciated if it is judged to be exhaustible (in other words, if it is utility will be used up by display, education, or research) Depreciation is not necessary if the item is viewed as being inexhaustible

Question 54

A city builds a sidewalk for $100,000 in a neighborhood as a special assessment project. In other words, the citizens being benefited must pay a portion (or all) of the cost of the sidewalk.

Under what condition is the flow of cash for this project recorded within the Agency Funds?

Answer 54

All cash flows associated with a special assessment project are reported within an agency fund if the government has no obligation for the cost incurred. In those cases, the government simply collects money from the citizens and turns it over to the contractor with no liability being accepted. If the project is recorded in an Agency Fund, no revenues, expenses, or expenditures are reported by the government.

Question 55

A city builds a sidewalk for $100,000 in a neighborhood as a special assessment project. In other words, the citizens being benefited must pay a portion (or all) of the cost of the sidewalk. The government has some obligation, so the costs are not recorded in an agency fund. The construction is finished and $100,000 is collected from the citizens and given to the contractors.

On fund-based F/S, what reporting is made?

Answer 55

On fund-based F/S for the governmental funds, expenditures of $100,000 will be reported for the sidewalk construction, along with revenues of $100,000. No capital assets are reported in these statements.

Question 56

A city builds a sidewalk for $100,000 in a neighborhood as a special assessment project. In other words, the citizens being benefited must pay a portion (or all) of the cost of the sidewalk. The government has some obligation, so the costs are not recorded in an agency fund. The construction is finished and $100,000 is collected from the citizens and given to the contractors.

On government-wide F/S, what reporting is made?

Answer 56

On government-wide financial statements, a capital asset of $100,000 will be reported, along with revenues of $100,000

Question 57

An entity issued property tax assessments of $500,000 for year 1, and collects $300,000 during that year. It expects to collect another $130,000 during the first month of year 2 and the final $70,000 during the sixth month of year 2.

What revenue is recognized in year 1 on government-wide and fund-based F/S?

Answer 57

On government-wide F/S, accrual accounting is utilized. The government issued $500,000 in assessments that will eventually prove to be collectible. Hence, the entire $500,000 is recognized in year 1.

On fund-based F/S, for the governmental funds modified accrual accounting is applied. Because of specific rules, property taxes are viewed as available if received during the current year or within 60 days of the subsequent year. Thus, for fund-based financial statements, revenues of only $430,000 are reported.

Question 58

A state or city government holds a capital asset and now believes that the value of this asset may have been impaired.

How is the decision as to impairment made?

If the value of the capital asset is impaired, what reporting is made?

Answer 58

a capital asset is impaired if there is a decline in its service utility that is large in magnitude and the event or change in circumstance is outside the normal life cycle of the asset

if the asset is judged to be impaired and it is no longer to be used, it is immediately recorded at the lower of its book value or fair value

if the asset is judged to be impaired but the government will continue to use it, a loss should be computed based on either the amount that would be needed to restore its value or the reduction in service utility that has occurred.