GASB Issues Lease Standard

Chris Gaetano
Published Date:
Jun 29, 2017


The Government Accounting Standards Board (GASB) issued guidance that establishes a single approach to accounting for and reporting leases by state and local governments. This single approach is based on the principle that leases are financings of the right to use an underlying asset. The move harmonizes the GASB standards with those already released by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB). 

Under the new standards, a lessee government will recognize a lease liability and an intangible asset representing the lessee's right to use the leased asset. In the financial statements, it would report the amortization expense for using the lease asset over the shorter term of the lease or the useful life of the underlying asset; the interest expense on the lease liability; and note disclosures about the lease, including a general description of the leasing arrangement, the amount of lease assets recognized and a schedule of future lease payments to be made. 

A lessor government will recognize a lease receivable and a deferred inflow of resources. On the financial statements, it would report lease revenue systematically recognized over the term of the lease, corresponding with the reduction of the deferred inflow; interest revenue on the receivable; and note disclosures about the lease, including a general description of the leasing arrangement and the total amount of inflow of resources recognized from leases. 

“The Board’s new leasing guidance better aligns the accounting and financial reporting of these arrangements with their economic substance,” said GASB Chairman David A. Vaudt. “The new single model for reporting governmental leasing agreements is designed to result in greater transparency and usefulness for financial statement users. It also is meant to reduce complexity in application for preparers and auditors of governmental financial statements.”

The requirements of the leasing guidance are to be effective for reporting periods beginning after December 15, 2019, with earlier application encouraged.

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