Article 08/01/2017

New Rules on a Government’s Accounting for Leases

Connie Spinelli, CPA
Capital building exterior

In June, the Governmental Accounting Standards Board (GASB) issued final guidance establishing a uniform approach to accounting for and reporting on leases as financing activities. The concept of operating leases disappears under the new guidance, effective in calendar year 2020 with earlier application encouraged. The treatment of leases under Statement No. 87 will be comparable to the current guidance for capital leases. A lessee government will recognize a lease liability and intangible right-to-use lease asset at the lease term’s beginning. Rent expense under today’s operating leases will be replaced with interest and amortization expenses. Lessor entities will record a lease receivable and deferred inflow of resources at the lease term’s beginning. The leased asset will not be derecognized.