One of the requirements of GASB34 is that asset purchases be accounted for on a full accrual basis, similar to how they would be accounted in a commercial environment. Instead of expensing assets upon purchase, the assets are to be charged to a capital account and depreciated over a given useful life. For demonstration purposes we will use two ledgers – one as the primary modified accrual ledger to record the assets purchases as expenditures and the other as a secondary full accrual ledger for all GASB compliant entries.
To accomplish the initial capitalization upon purchase, we created a custom rule for the full accrual ledger. The rule maps the expenditure charge account entered on the invoice (or P.O. charge account, assuming the invoice is matched to a purchase order) to a capital account.
The first step is to create a new Mapping Set:
The value set is the one that is used for our chart of accounts natural account segment, which is the segment used as the basis for this mapping. The input value is the expenditure charge account, i.e. the value used to charge the expenditure to the modified accrual ledger. The output value is the asset account that is to be used to book the capitalization to the full accrual ledger.
The next step is to create the Account Derivation Rule (ADR)
This rule simply calls the mapping set that we created in the earlier step.
Next we need to assign our new ADR to the applicable Journal Line Definition (JLD). Since the seeded JLD is protected and not modifiable, we need to copy the seeded JLD:
In order to assign our newly created ADR, we simply select the Journal Line Type for Item Expense and add a row for the segment Object and assign our rule name.
The JLD can now be assigned to the Application Accounting Definition.
Author: John K.
