Aug 14, 2026
By Ivette Campos Salazar, CPA
In recent years, many foundations declared of public interest in Costa Rica have taken on an important role in delivering social programs. Some administer resources from the Social Protection Board, donations or public transfers, making it necessary to present their financial information clearly and understandably. From a purchase as common as a vehicle, equipment, furniture or an improvement for operations, accounting questions arise that are worth reviewing carefully: how it was financed, what the Board approved, what conditions the agreement included and how the acquired asset should be presented. This article seeks to contribute to that conversation from a practical perspective.
When the Administrative Board sets aside part of the surplus for a future investment, it normally makes an internal designation within equity. The reserve indicates that those resources have a defined purpose. That decision must be documented: Board resolution, amount, purpose, term and relationship with the work plan. The reserve does not replace the accounting record of what is purchased, nor does it eliminate the conditions attached to the funds if they come from the Social Protection Board, another public institution or a restricted donation.
If an asset exists, it must be shown. IAS 16 governs the treatment of property, plant and equipment. In simple terms, if the item will be used for more than one period and meets the recognition criteria, it must be recorded as an asset at cost. This means that when a vehicle, equipment or capitalizable improvement is purchased, cash decreases and property, plant and equipment increase. The purchase is not simply eliminated against the reserve. Recording the purchase only against equity may seem simple, but it omits an important fact: the asset exists and the entity controls it.
Not every improvement is capitalized. The name used in the budget does not by itself define the accounting treatment. An expansion that increases a building’s capacity or the replacement of a significant component may be an investment. By contrast, a minor repair, ordinary painting or preventive maintenance is usually recognized as an expense for the period. Therefore, a project financed with a CAPEX reserve may include items that are capitalized and others that must go directly to profit or loss. Classification depends on the nature of each disbursement, not on the source that finances it.
Once the objective has been fulfilled, the reserve may be released or reclassified within equity. That movement is not income and does not modify the cost of the asset. The investment has already been recognized in property, plant and equipment. IFRS do not require an internal reserve to be reduced at the same pace as depreciation. However, the adopted policy must be clear, consistent and understandable for those who read the financial statements. Depreciation continues to apply because it represents the consumption of the asset during the periods in which it helps fulfill the entity’s mission.
When the investment is financed with public resources, such as funds from the Social Protection Board, the analysis requires greater care. These are public resources administered by a private entity, with a social purpose, budget, controls and accountability requirements. The Office of the Comptroller General of the Republic maintains technical standards for patrimonial benefits granted through transfers from the public sector to private entities. In this framework, the resources retain their public nature and require traceability: budget, authorization, execution, settlement and evidence of the use given to the funds.
In practice, the foundation should be able to connect the transfer received, agreement or program, separate account when applicable, supplier, invoice, payment, acquired asset, location, use and report submitted. This is particularly relevant for foundations declared of public interest. Managing public funds is not the same as managing an unrestricted private donation. There must be sufficient traceability to demonstrate that the resources were used for the authorized purpose.
To compare private and public funds, it is useful to separate two questions: which accounting framework the foundation has adopted and what additional obligations arise from the source of the resources. An entity does not move from IAS 16 to Section 17 merely because it uses public or private funds. It must consistently apply the framework that corresponds to it. Under full IFRS, the asset is analyzed under IAS 16 and, if there is a government grant, under IAS 20. Under the IFRS for SMEs Standard, the references are Section 17 for property, plant and equipment and Section 24 for government grants.
The main difference is not whether the asset should be recognized or depreciated; that applies in both cases when the criteria are met. What changes is the level of traceability, control and accountability. A private donation is supported by the donor agreement, internal policies and applicable audit. A public transfer adds the technical standards of the Office of the Comptroller General, the authorized budget, the conditions imposed by the granting entity, settlement and evidence of the use given to the resources.