Top Three Tribal Government Considerations for GASB 87

Thoughtware Article Published: Sep 25, 2019
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Tribal governments are arguably the most diverse subset of governmental organizations. A majority of these tribal governments and related enterprises will be significantly affected by GASB 87, Leases. This standard is, in effect, bringing lessee/lessor accounting to the face of the financial statements and increasing long-term liabilities for many governments. The distinction between operating and capital leases is going away.

Here are the top three factors tribal governments should heavily consider when implementing GASB 87:

The Lessor Side of GASB 87

Tribal governments are often the lessors of right-to-use assets such as tribal land and buildings. GASB 87 requires a lessor receivable to be recorded for these transactions. This receivable must be discounted based on the rate implicit in the lease. Many lessor agreements don’t have a specified rate, and this rate determination should be thought through and documented. In addition, tribal governments may want to evaluate their related-party and intra-entity leases and understand how the new leasing guidance affects these types of transactions.

Decentralized Departments & Enterprises

A tribal government’s reach extends well beyond its tribal offices into health care facilities and various enterprises. This causes many tribal governments to operate in a decentralized manner, allowing these separate operations or departments to enter into their own financial agreements, including leasing arrangements. This makes accumulating the population of a tribe’s leases a difficult and time-consuming task.

Casino Operations

Many tribal governments lease their gaming machines. Often these leases aren’t standard across vendors. Adding to the complexity, these leases sometimes contain both a right-to-use asset and a software asset component that tribes may need to evaluate. The right-to-use portion of the leases are now likely scoped into GASB 87 and will affect the long-term liabilities for casinos. Tribal governments should evaluate their loan agreements and determine how this new accounting will affect their covenants and communication with lenders early in the implementation process. Some good news for casinos is that lease gaming machine rights are scoped out of the new leasing standard, as they’re intangible assets.

GASB 87 is effective for periods beginning after December 15, 2019. Tribal governments should consider the three items above, along with a variety of other intricacies in the standard. This standard is distinctly different from its FASB counterpart, and tribal governments may want assistance from someone with governmental expertise throughout the transition process.

BKD tribal government advisors provide a variety of services to some of the largest tribal governments in the country and can assist in implementation. If you would like more information, reach out to your BKD trusted advisor or use the Contact Us form below. Further BKD Thoughtware® is available covering tribal government issues—visit to learn more.

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