The Governmental Accounting Standards Board (“GASB”) has issued a new single model to help state and local governments report leasing agreements. GASB Statement (“GASBS”) No. 87, Leases, categorizes leases as financing arrangements that allow customers to use the leased asset.
Per the standard, governments that act as lessees must report a liability for the contract, as well as report an intangible asset indicating their ability to use the leased item. For government entities that are lessors, they must disclose a receivable for the lease and a deferred inflow of resources. Nonfinancial assets such as vehicles, heavy equipment, and property are covered by the standard, but donated or intangible assets are excluded.
Speaking on the leasing standard, GASB Chairman David Vaudt said the guidance brings into line the accounting and financial reporting of lease arrangements with their economic nature. Vaudt also said the new single model will reduce confusion among governmental financial statement auditors and preparers.
GASBS No. 87 must be applied to financial reporting periods starting after December 15, 2019, but early adoption is permitted.