GASB Proposes Single Approach for Lease Reporting
The Governmental Accounting Standards Board (“GASB”) has issued a proposal that would create a single model for state and local governments to report leases on their financial statements. The approach would be based on the notion that leases are financings of the right to use an underlying asset. Exceptions like short-term leases and financed purchases are given in the draft guidance, but the proposed Statement would cover lease contracts for nonfinancial assets such as vehicles, heavy equipment and buildings. Grants, donated assets and leases of intangible assets, however, would be excluded from the guidance.
Per the Exposure Draft, Leases, a lessee government would have to report a lease liability and an intangible asset showing its right to use the leased asset. In addition, a lessor government would have to report a lease receivable and a deferred inflow of resources.
In a February 8th news release, GASB Chair David Vaudt said the establishment of a single approach for governments to report leasing agreements could improve the transparency and usefulness of financial statements. Vaudt also remarked that the proposal would reduce complexity issues for preparers and auditors.
Comments on the Exposure Draft are due Tuesday, May 31st. The GASB has scheduled a public hearing on the Exposure Draft for Wednesday, June 29th. Registration details are available in the Exposure Draft.