It’s time to start thinking about GASB 87 and how leases will impact your entity! We recommend you begin gathering information now and continue throughout the year so you are well-prepared to report this information at the time of your required implementation date. The following is information to assist with the proper accounting for each lease held by the entity.

Step 1. Determine all the leases the entity holds.

Step 2: Is the entity considered the lessee or the lessor? A definition of a lessee is that you are paying to use an asset owned by a different company or organization. A lessor is receiving money for allowing a different company or organization to use an asset that you own.

Step 3: Obtain agreements, contracts, or some other form of written documentation to help compile the necessary information for financial reporting. Here are some items to consider. 1) What is the lease term (in years)? 2) When was the date the lease started? 3) Know the payment information such as: How many payments are made each year? What is the dollar amount of each payment? What is the interest rate on the lease?

Think Ahead

• Does ownership of the asset transfer at the end of the lease?
• Does the lessee have an option to purchase the asset at the end of the lease?
• Does the lease have an early termination option for either you or the other party?

Consider these Values

• Is a portion of the lease payment for maintenance on the asset?
• Are there additional costs related to placing the asset into service?

Step 4: Reach out to your auditor if you need assistance with the implementation.
The implementation date for entities with years ending on December 31^st are required to implement for the year ended December 31, 2020. Entities with years ending on June 30^th are required to implement for the year ended June 30, 2021. While the implementation date is still 1 – 1 ½ years out, we all know how quickly one year can go by – it’s already 2020 by the way!

Other GASB 87 Articles
CDS published this related article, “Preparing for Lease Accounting” on July 1, 2019.