For years, municipalities have invested significantly in infrastructure and other municipal assets with the objective of maintaining or enhancing community service levels.  These assets (referred to as "tangible capital assets") include linear assets (roadways, water and sewer systems), land, facilities, equipment, and vehicles all used by municipalities in their day-to-day operations.  In the past, when these asets were acquired or constructed, the funds expended would appear on the municipality's financial statements as an expense for that particular year.

With the introduction of new reporting requirements as per section 3150 of the Public Sector Accounting Board (PSAB) Handbook, municipalities will be required to report tangible capital assets as assets (versus expenses) on the financial statements.  In comparison to the previous approach, financial statements will not only show how much has been spent on tangible capital assets, but also how much they have amortized (or decreased in value) since construction/acquisition.  PSAB 3150 also requires the disclosure of contributed assets, such as linear assets constructed by developers and dedicated to a municipality as part of a development agreement.

Watson & Associates has been assisting municipalities in becoming compliant with the new PSAB 3150 requirements, which has been labeled as the greatest change in municipal accounting in decades.  In conjunction with becoming compliant, it is important for municipalities to ensure a solid inventory and PSAB 3150 policy is established to ensure that a foundation exists to maintain compliance over the long term.  As well and perhaps more importantly, municipalities should consider developing database and financial planning policies which facilitate long-term asset management practices to be used in budgeting and capital forecasting.

Watson & Associates Economists Ltd. has developed policies and approaches to address both historical reporting for PSAB and future financial planning for asset management purposes and is involved in their application.