GASB 87: Lease Accounting Software
Find out how GASB 87 lease accounting software provides functionalities needed to maintain compliance with GASB No. 87 and other financial reporting ...
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Everything you need to know about GASB 87 and how this lease accounting standard relates to ASC 842 and IFRS 16.
Table of contents
GASB Statement No. 87 is the latest lease accounting and financial reporting standard established by the Governmental Accounting Standards Board (GASB). GASB 87 applies to state and local governments and it will exist alongside two other new lease accounting standards, ASC 842 and IFRS 16.
According to the GASB website, GASB 87 aims to:
Under GASB 87, leased assets include all non-financial assets, including land, buildings, vehicles and equipment. Out of scope leases and agreements include:
GASB 87 will replace current GASB guidance, including GASB 62 (issued in 2010 and mirroring much of ASC 840) and GASB 13 (issued in 1990). The primary differences lie in lease classifications – and, by extension, what must be reported and recognized.
Many leases that were previously recognized as operating leases, for example, must be reported as capital leases under the new single-model approach. This is very similar to IFRS 16 (while, under ASC 842, the distinction between operating leases and finance leases still holds). This means that contracts for those leases must appear on the balance sheet, where organizations will have to recognize lease liability and a right-of-use asset.
Overall, then, auditors will no longer look at whether a lease is an operating lease or a capital lease. Instead, they will look at if the lease falls under GASB 87 as a contract lease.
Yes. GASB Statement No. 87, Leases, was originally proposed in 2017, with an original effective date of December 15, 2019. However, in May of 2020 GASB released Statement No. 95, which delayed GASB No. 87 until June 15, 2021.
That said, GASB encourages early adoption and achieving compliance with GASB 87 can be complicated and time-consuming, so it is highly encouraged to consider adoption as quickly as possible.
The right lease accounting software can streamline adoption and simplify compliance with all major standards.
The definitions of lease and lease term are generally the same between the standards. However, the GASB approach is consistent with IFRS 16 in that the lessee will classify all leases as financing arrangements. Additionally, accounting for short-term leases and contracts that transfer ownership is different between GASB and FASB.
GASB and FASB, the Financial Accounting Standards Board, serve different purposes and constituents. FASB sets accounting standards for private sector entities, while GASB focuses on the public sector. Key differences between GASB and FASB standards include:
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