The Governmental Accounting Standards Board (GASB) has issued an Exposure Draft of the proposed Implementation Guide, Leases. The Exposure Draft includes contains questions and answers on government lease accounting under the GASB’s new standards on accounting and financial reporting for leases. The comment ending date is April 30, 2019.
The Exposure Draft proposes answers to questions about GASB Statement No. 87, Leases. GASB Implementation Guides are intended to clarify, explain, or elaborate on the requirements of GASB Statements and apply to the financial statements of all state and local governments.
Government Lease Accounting
The GASB released Statement 87 in June 2017. The Statement includes guidance that establishes a single approach to accounting for and reporting leases by state and local governments. The GASB based Statement 87 on the principle that leases are financings of the right to use an underlying asset.
Under Statement 87, government entities that are lessees recognize (a) a lease liability and (b) an intangible asset representing the lessee’s right to use the leased asset. It reports in its financial statements (a) amortization expense for using the lease asset over the shorter of the term of the lease or the useful life of the underlying asset, (b) interest expense on the lease liability, and (c) note disclosures about the lease.
Government entities that are lessors recognize (a) a lease receivable and (b) a deferred inflow of resources. Lessor entities will continue to report the leased asset in their financial statements. Lessor entities also report in their financial statements (a) lease revenue, recognized over the term of the lease, corresponding with the reduction of the deferred inflow, (b) interest income on the receivable, and (c) note disclosures about the lease.
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