GASB Financial Reporting Model Reexamination
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Audit Prep for June 30, 2022 Year-ends

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What Governments Need to Know Now for GASB 87 – Leases

URGENT! Your budget may NEED TO BE AMENDED to coincide with the implementation of GASB 87.

Background

Ready or not…GASB Statement No. 87 – Leases is here! This GASB must be implemented in the June 30, 2022 financial statements. GASB 87 requires a lessee to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources.

Practical hint: Short-term (less than one year) leases will be recorded as operating leases had been. 

What to do now 

Get lease information ready, amend the fiscal year 2021-22 budget for any new current year leases (exceeding one year), and make journal entries for leases before closing out the current fiscal year.

Information to collect

For current leases:

  • Lease description
  • Original lease term
  • Any renewal options, and the determination of the likelihood of utilizing those options
  • Components of the payments (fixed, variable, interest rate)
  • Who has the right to terminate the lease
  • Lease obligation maturities for the next five years and beyond (similar to debt maturity schedule)

Leases initiated after 7/1/21 (in this fiscal year):

  • Calculate the right-of-use asset and lease liability. Practical hint: Total cost of leased equipment (as if a “capital lease”).

  • Governmental Fund Level: In the current fiscal year ending June 30, 2022 – this will be included as a:
    • Revenue: Other financing sources – lease financing
    • Expenditure: Lease right-to-use assets (capital outlay)
  • URGENT: Include Revenue and Expenditure amounts in final budget amendments for the current fiscal year for the Governmental Funds (ending June 30, 2022).

  • Business-type funds, Internal Service Funds, and Government-wide level: In the current fiscal year ending June 30, 2022 – this will be included as:
    • Asset: Right-to-use assets
    • Liability: Lease liability

Your Yeo & Yeo professionals will provide additional guidance and individual assistance during the audit process.

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