GASB 104: Capital Asset Disclosures and Assets Held for Sale

GASB Standards

Scope & Methodology: This article is based on publicly available sources including GASB official guidance, state auditor resources, and CPA firm analyses. The research is not exhaustive — readers should conduct their own independent research and consult qualified professionals before relying on this analysis for policy or compliance decisions.

GASB 104: Capital Asset Disclosures and Assets Held for Sale

Executive Overview

In September 2024, the Governmental Accounting Standards Board (GASB) issued Statement No. 104, Disclosure of Certain Capital Assets, a targeted standard addressing a gap in financial statement disclosure practices. The standard addresses two distinct disclosure gaps: (1) requiring intangible capital assets—including right-to-use lease assets under GASB 87, subscription IT assets under GASB 96, and operator right-to-use assets under GASB 94—to be disclosed separately from owned tangible capital assets, organized by major class; and (2) requiring separate disclosure of capital assets held for sale. While the measurement and recognition of these assets remains unchanged, GASB 104 requires explicit disclosure in the notes to the financial statements. The standard is effective for fiscal years beginning after June 15, 2025, meaning governments with fiscal years beginning after June 15, 2025, will implement per GASB 104 (effective date per GASB summary).

What Prompted GASB 104?

Financial statement users—including credit analysts and bond rating agencies—have cited the need for additional transparency regarding capital assets that are no longer essential to government operations (GASB 104 Basis for Conclusions, 2024). When a city government, airport authority, or water utility decides to divest itself of real property, equipment, or other assets, this information can be relevant to users assessing the government's long-term financial strategy and the availability of resources. Prior to GASB 104, such assets were previously included within general capital asset disclosures without separate identification. GASB 104 requires separate disclosure of these assets.

Criteria: What Makes an Asset "Held for Sale"?

GASB 104 defines a capital asset as held for sale if—and only if—both of the following conditions are met:

  1. The government has decided to pursue the sale — This is an affirmative decision by the government (typically at the board or council level) to divest the asset.

  2. It is probable the sale will be finalized within one year — The government must assess the likelihood that the sale will be completed within 12 months of the financial statement date.

The standard provides specific factors to evaluate when determining probability of sale:

  • Availability for immediate sale — Is the asset available in its present condition, or does it require remediation or restoration before sale?

  • Active marketing efforts — Has the government initiated an active program to locate a buyer? This may include listing the property with a realtor, placing it on a public auction platform, or issuing a request for proposals.

  • Market conditions — What are current market conditions for similar assets in the relevant geographic area? Are comparable properties selling readily, or is the market soft?

  • Regulatory or administrative approvals — Does the sale require any special approvals (environmental clearance, zoning changes, historical preservation review)? If so, are these approvals likely to be obtained within the one-year window?

Intangible Capital Asset Disclosures

Beyond held-for-sale assets, GASB 104 addresses a second disclosure gap: the separate presentation of intangible capital assets. Prior to GASB 104, right-to-use lease assets (GASB 87), subscription IT assets (GASB 96), operator right-to-use assets (GASB 94), and other intangible assets could be commingled with owned tangible capital assets in note disclosures, making it difficult for financial statement users to distinguish between assets a government owns outright and assets it holds under contractual arrangements.

GASB 104 requires governments to disclose intangible capital assets separately from owned tangible capital assets, organized by major class. This means the capital assets note must distinguish between:

  • Owned tangible capital assets — land, buildings, equipment, infrastructure
  • Right-to-use lease assets (GASB 87) — leased buildings, equipment, vehicles
  • Subscription IT assets (GASB 96) — cloud computing arrangements, software subscriptions
  • Operator right-to-use assets (GASB 94) — assets in public-private partnership arrangements
  • Other intangible assets — easements, water rights, patents, software developed internally

This separation gives analysts and credit rating agencies a clearer picture of what a government actually owns versus what it accesses through lease or subscription arrangements—a distinction that has become increasingly important as governments adopt GASB 87 and GASB 96.

Key Disclosure Requirements for Held-for-Sale Assets

Under GASB 104, the specific disclosure requirements for capital assets held for sale are:

Mandatory Disclosure Components

  • Ending balance of capital assets held for sale — The ending balance must present both historical cost and accumulated depreciation/amortization separately, by major class of asset (land, buildings, equipment, etc.). This is not a single net "carrying value" figure—both components must be disclosed individually to give financial statement users full visibility into the original investment and the extent of depreciation.

  • Debt pledged as collateral — If the government has pledged any of these assets as collateral for outstanding debt, the carrying amount of the associated debt must be disclosed.

Placement in Financial Statements

assets held for sale are NOT separated on the face of the statement of net position. They continue to be reported within their appropriate major class in the balance sheet. The disclosure is confined to a separate paragraph in the capital assets note to the financial statements. This approach maintains consistency with the asset's classification while drawing attention to its status.

Practical Application: Examples

Example 1: City Water Treatment Plant A mid-sized city owns an older water treatment facility that it no longer needs following the completion of a new regional treatment plant. In December 2025, the city council votes to sell the old facility. By March 2026, the city has hired a commercial realtor, listed the property at fair market value, and begun showing it to potential industrial and commercial buyers. Comparable properties have sold within 6 months (local market data), and according to the realtor's projections as of March 2026, the sale is expected to close by June 2026.

At the city's June 30, 2026 year-end (for FY 2026 financial statements), the old plant qualifies as held for sale: the decision was made, active marketing is underway, market conditions are supportive, and sale within one year is probable. The city will disclose the plant's carrying amount in the capital assets note, broken out under "Buildings and Improvements—Held for Sale."

Example 2: Regional Airport Equipment An airport authority owns specialized baggage handling equipment that is no longer compatible with the airport's new automated system. The equipment is functional but specialized to the airport's prior operations. The authority decides to sell it but realizes that finding a buyer for used airport equipment will take time. By June 30, 2026, the authority has listed the equipment on industrial equipment auction sites and contacted other airports, but has not yet received an offer. Based on management's assessment as of June 2026, the timeline for sale is uncertain; it could take 18 months or longer.

The equipment does not meet the "held for sale" criteria at June 30, 2026, because it is not probable that the sale will be finalized within one year. Once the authority receives firm offers and it becomes probable that the sale will close within one year, the asset moves into "held for sale" classification.

Example 3: Municipality with Impaired Real Estate A city owns land that was zoned for industrial use but is now in a residential area following municipal zoning changes. The city council votes to sell the land, but because of the zoning complications and the need for a potential buyer to obtain rezoning approval, the timeline for sale is unclear. Additionally, similar properties have remained unsold for 2+ years (local MLS data).

Given these circumstances, the city should not classify the land as held for sale, because the sale is not probable within one year. However, if the city receives a specific offer contingent on rezoning approval and the rezoning is expected to be approved within one year, the probability threshold might be met.

Implementation Steps for Finance Teams

Finance officers may consider the following implementation process:

Step 1: Establish a Classification Policy One approach is to document your government's policy for identifying and classifying assets as held for sale. Include thresholds for asset significance, the approval process required (board vote, council resolution), and the evidence needed to support the "probable within one year" assessment.

Step 2: Perform an Inventory Review Consider reviewing all capital asset categories to identify any items the government has decided to sell. This should be done in coordination with department heads, asset managers, and the governing board.

Step 3: Assess Probability of Sale For each identified asset, governments may evaluate the four GASB factors. Document your assessment in writing, including:

  • Condition of the asset
  • Evidence of active marketing (realtor engagement, listing, advertisement)
  • Market conditions for similar assets
  • Any regulatory hurdles and timeline for approval

Step 4: Update Capital Asset Records If assets are classified as held for sale, fixed asset systems may be updated to flag these assets for separate disclosure.

Step 5: Draft Disclosure Language Note disclosure language may be prepared including the ending balance, breakdown by asset class, and debt collateralization information (per GASB 104 paragraphs 11-12).

Step 6: Coordinate with Your External Auditor Coordination with external auditors may include discussing the classification to ensure consistency with audit procedures and expectations.

Auditor Perspective and Testing

External auditors performing financial statement audits will test the appropriateness of management's classifications under GASB 104. Audit guidance from the AICPA and state auditors (2025) highlights common procedures such as:

  • Inquiry and observation — Understanding management's intent regarding specific assets and observing evidence of active marketing efforts.

  • Evaluation of probability assessments — Reviewing market data, offers received, timeline expectations, and regulatory requirements to assess whether the "probable within one year" criterion is satisfied.

  • Reasonableness testing — Comparing the government's assessment with actual subsequent events (if applicable) and with similar assets in the market.

  • Disclosure completeness — Ensuring that all assets held for sale are disclosed with appropriate detail.

Frequently Asked Implementation Questions

Q: If we list an asset for sale but don't receive an offer within one year, do we reclassify it? A: Yes. If the sale does not occur within one year, the asset should be reclassified out of "held for sale" and returned to its standard capital asset category in subsequent financial statements. The probability assessment is made at each year-end.

Q: Do we need separate lines in the capital asset roll-forward table for held-for-sale assets? A: No. GASB 104 explicitly states that assets held for sale should not be broken out as separate lines in the capital asset roll-forward table; they remain within their major class. The separate disclosure is in the narrative paragraph of the capital assets note.

Q: If an asset is subject to environmental cleanup before sale, does that affect classification? A: It may. If environmental cleanup is required and will not be completed within one year, the asset may not meet the "available for immediate sale" criterion. However, if the cleanup is underway and expected to be complete within one year, classification as held for sale could still be appropriate.

Q: How do we handle the sale of contributed assets or those acquired from grants? A: The treatment is the same. Contributed assets and grant-funded assets continue to be reported within their appropriate capital asset class, depreciated (if applicable), and disclosed as held for sale if the criteria are met. Any restrictions on the asset (e.g., grant-funded property that must remain in public use) may affect the feasibility of sale and should be considered in the probability assessment.

Interaction with Other Standards

GASB 104 does not change how capital assets are measured or depreciated. It is a disclosure-only standard. Governments applying GASB 87 (Leases) or other asset-related standards should continue to follow those standards; GASB 104 simply adds clarity to the disclosure of a specific subset of assets.

Summary

GASB 104 is a straightforward disclosure requirement that provides financial statement users with visibility into a government's plans to divest capital assets. While implementation does not require changes to measurement, depreciation, or balance sheet presentation, it does require finance teams to systematically identify held-for-sale assets, document the supporting analysis, and enhance disclosure language. Based on implementation reviews in the first adoption cycle in 2025-26 (Plante Moran, 2025), the effort is primarily a matter of documentation and disclosures, and industry feedback indicates financial statement users value the resulting transparency. Finance officers preparing for FY 2026 implementation may wish to begin the asset review process in advance and formalize classification policies to promote consistency and audit readiness.

This content was prepared using publicly available sources. No confidential or proprietary data from any client engagement was used. It is provided for informational purposes only and does not constitute legal, financial, or investment advice. All data should be independently verified before use in any official capacity. © 2026 DWU Consulting. All rights reserved.

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This article was prepared with AI-assisted research by DWU Consulting. It is provided for informational purposes only and does not constitute legal, financial, or investment advice. All data should be independently verified before use in any official capacity.