Introduction to GASB 87
The Governmental Accounting Standards Board (GASB) Statement 87 provides guidance on lease accounting for lessors, which is essential for financial reporting and transparency. This statement aims to improve the consistency and comparability of lease accounting among governmental entities.
GASB 87 introduces significant changes to the existing lease accounting model, including the definition of a lease, lease classification, and lease term. These changes require lessors to reassess their lease agreements and implement new accounting and disclosure requirements.
Lessor Accounting Under GASB 87
Under GASB 87, lessors are required to classify leases as either Type A or Type B leases, depending on the terms and conditions of the lease agreement. Type A leases are those that transfer substantially all the benefits and risks of ownership, while Type B leases are those that do not.
Lessor accounting under GASB 87 involves recognizing lease revenue and lease expense, as well as disclosing certain information about the lease agreement, such as the lease term, lease payments, and any options to purchase or terminate the lease.
Disclosure Requirements for Lessor Accounting
GASB 87 requires lessors to disclose certain information about their lease agreements, including the lease term, lease payments, and any options to purchase or terminate the lease. This information is essential for users of financial statements to understand the lessor's financial position and performance.
In addition to the required disclosures, lessors may also need to provide additional information about their lease agreements, such as the nature of the leased asset, the lease payment schedule, and any contingent rents or other lease-related costs.
Implementation Guidance for GASB 87
Implementing GASB 87 requires lessors to assess their existing lease agreements and identify any changes that need to be made to comply with the new accounting and disclosure requirements. This may involve revising lease agreements, updating accounting policies and procedures, and providing training to staff.
Lessor should also consider the impact of GASB 87 on their financial reporting and budgeting processes, as well as any potential effects on their financial position and performance. It is essential to consult with a professional accountant or auditor to ensure a smooth transition to the new accounting standard.
Conclusion and Next Steps
GASB 87 provides a new framework for lease accounting for lessors, which aims to improve the consistency and comparability of financial reporting among governmental entities. By understanding the requirements and implications of GASB 87, lessors can ensure compliance and provide accurate and transparent financial information to stakeholders.
To ensure a successful implementation of GASB 87, lessors should start by assessing their existing lease agreements and developing a plan to address any changes or updates required by the new standard. This may involve consulting with a professional accountant or auditor and providing training to staff on the new accounting and disclosure requirements.
Frequently Asked Questions
What is the effective date of GASB 87?
The effective date of GASB 87 is for fiscal years beginning after June 15, 2021.
How do I classify a lease under GASB 87?
To classify a lease under GASB 87, you need to determine whether the lease is a Type A or Type B lease, based on the terms and conditions of the lease agreement.
What are the disclosure requirements for lessor accounting under GASB 87?
The disclosure requirements for lessor accounting under GASB 87 include the lease term, lease payments, and any options to purchase or terminate the lease.
Do I need to retroactively apply GASB 87 to existing lease agreements?
No, GASB 87 does not require retroactive application to existing lease agreements, but you need to disclose the nature of any changes made to comply with the new standard.
How does GASB 87 impact my financial reporting and budgeting processes?
GASB 87 may impact your financial reporting and budgeting processes, as it introduces new accounting and disclosure requirements that need to be considered when preparing financial statements and budgets.
Where can I find guidance on implementing GASB 87?
You can find guidance on implementing GASB 87 on the GASB website, as well as through professional accounting and auditing organizations, such as the American Institute of Certified Public Accountants (AICPA).