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Business Procedures Manual

7.14 Capital Asset Impairment

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Institutions must evaluate Capital Assets annually for impairment. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly.

Events or changes in circumstances that may be indicative of impairment include:

  • Evidence of physical damage
  • Enactment or approval of laws or regulations or other changes in environmental factors
  • Technological changes or evidence of obsolescence
  • Changes in the manner or duration of use of a Capital Asset
  • Construction stoppage

A capital asset generally should be considered impaired if both:

  1. The decline in service utility of the capital asset is large in magnitude; and,
  2. The event or change in circumstance is outside the normal life cycle of the capital asset.

Institutions within the University System of Georgia should record an impairment loss (or gain, although unlikely) if the net gain or loss exceeds the following amounts, which are net of any realizable insurance recoveries:

  • Equipment: $100,000
  • All other Capital Assets: $250,000

An Impairment loss should be reported as follows in the institution’s Annual Financial Report:

  1. If the impairment event was unusual and infrequent, report the loss as an Extraordinary Item, which is separately reported at the bottom of the Statement of Revenues, Expenses and Changes in Net Assets (SRECNA).

  2. If the impairment event was unusual or infrequent and within Management’s control, report the loss as a Special Item, which is separately reported at the bottom of the SRECNA.

  3. If the impairment event was neither unusual nor infrequent, report the loss as an Operating Expense on the SRECNA.

As evidence that Capital Asset impairment has been evaluated, institutions should complete the following Impairment Questionnaire annually:

Capital Asset Impairment Questionnaire

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