As the effective date for the new lease accounting rules draws nearer, GASB just finalized an implementation guide, Implementation Guide 2019-03, Leases, to address the numerous questions raised on the application of and transition to the new accounting model.
The document provides authoritative guidance (Category B generally accepted accounting principles) in a question-and-answer format, as well as nonauthoritative illustrations. The illustrations can help governments in making the calculations, journal entries and disclosures necessary to implement the standard. They include reporting of an equipment lease, a building lease with a lease incentive and variable payments that depend on an index. The guide’s 77 questions address almost every aspect of the guidance, including scope, recognition and measurement and lease term.
The implementation guide’s requirements are effective for financial reporting periods beginning after December 15, 2019. Earlier application is encouraged if Statement 87 has been implemented. Any changes should be applied retroactively by restating financial statements, if practicable, for all prior periods presented. If restatement is not practicable, the cumulative effect should be reported as a restatement of beginning net position for the earliest period restated. In the first period of application, the financial statement notes should disclose the nature of the restatement and its effect or the reason for not restating prior periods.
For a comprehensive overview of GASB’s lease requirements, see BKD’s white paper, New Rules on a Government’s Accounting for Leases. BKD will soon issue an updated white paper incorporating these additional insights.
For some governments, the adoption of Statement 87 will be complex and likely will require significant hours to implement correctly. BKD can help educate your team, provide implementation tools and assist with analysis and documentation. If you would like assistance complying with the new guidance, contact your BKD trusted advisor.