What must be included when treating overhead capital asset depreciation in expenses?

When treating overhead capital asset depreciation in expenses, it must be included as part of general government functional activity. This approach is essential as it integrates the cost of capital assets within the broader context of governmental activities, thereby reflecting how these assets contribute to the delivery of government services. By incorporating depreciation into general government activities, financial statements provide a more accurate representation of the total expenses incurred in fulfilling various governmental functions.

Including depreciation in this manner helps capture the full economic cost associated with using capital assets over time, contributing to disciplinary accountability and transparency. It ensures that stakeholders have visibility into how resources are being utilized and how ongoing operational costs are impacted by asset depreciation. This practice aligns with governmental accounting principles that seek to provide comprehensive financial reporting, facilitating informed decision-making and resource allocation.