NAFOA POLICY ALERT: GASB Establishes Single Approach for Reporting Leases
June 30, 2017
The GASB has issued guidance that establishes a single approach to accounting for and reporting leases by state and local governments, including tribal governments. This single approach is based on the principle that leases are financings of the right to use an underlying asset.
GASB Statement No. 87, Leases, provides guidance for lease contracts for non-financial assets including: vehicles, heavy equipment, and buildings. However, excludes non-exchange transactions, including donated assets, and leases of intangible assets (such as patents and software licenses).
Under the new Statement, a lessee government is required to recognize: (1) a lease liability and (2) an intangible asset representing the lessee's right to use the leased asset. A lessor government is required to recognize: (1) a lease receivable and (2) a deferred inflow of resources. A lessor will continue to report the leased asset in its financial statements.