Accounting for Leases under the New Standard - New York State Comptroller

Accounting for Leases under the New Standard

Government Finance Officers Association

Webinar January 10, 2019

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Agenda

? Background ? Definition and scope ? Lease term ? Short-term leases ? Lessee accounting and financial reporting ? Lessor accounting and financial reporting ? Variations on lease contracts

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Background

GASB Statement No. 87, Leases, revises existing standards on lease accounting and financial reporting (primarily Statement No. 62)

? Issued June 2017 ? Effective for periods beginning after December

15, 2019 ? Earlier application is encouraged ? COD section L20 - Leases

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Why is this a big deal?

Definition of leases has changed

? "Capital" and "operating" lease terminology goes away

Must evaluate all current leases and contracts to determine if they meet the GASB 87 definition of a lease

? Leases previously not reported because they were operating, may now need to be added to the financial statements

Standard is to be applied retroactively

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Why is this a big deal? (cont.)

Existing leases must be measured and recognized based on facts and circumstances of the lease in the period of implementation of GASB 87, not inception of the lease.

If administration of leases is decentralized across your organization, may be difficult to determine what contracts are subject to the new lease accounting.

While net position generally unaffected (lease debt offset by intangible lease asset), the increase in reported debt for lessee governments that currently have operating leases may impact debt limits, covenants, and statutes.

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