Change – it’s the one constant in life. We see this in our careers, children growing up, in the weather from one day to the next, and, yes, in accounting standards.
This article addresses the changes brought about by the Government Accounting Standards Board (GASB) Statement No. 87, which outlines how state and local governments account for their leases.
What is GASB 87?
GASB 87 was issued to make the financial standing and the risk exposure of state and local governments clearer, more easily determined, by reviewing their financial statements. To do this, municipalities now use a single model for lease classification under GASB 87. They no longer make a distinction between capital leases and operating leases. All are now deemed finance leases.
If you’re familiar with Financial Accounting Standard Board (FASB) Topic 842, you’ll recognize this goal, as FASB and GASB both aim for full transparency on financial statements. Topic 842 is directed to private companies and still recognizes two lease models, while GASB 87 is a standard for government entities.
When is GASB 87 Effective?
GASB 87 was initially released in 2017. At the time, it had an effective start date for reporting periods after December 15, 2019. With the pandemic affecting everyone and everything, a pause to GASB 87’s start date was issued, pushing it back to reporting periods after June 15, 2021. Under GASB 87, entities should expect, though, to account for leases for the fiscal year before adoption.
This means, if you do lease accounting for state and local governments, you’re now (and probably have been already) working to fully understand GASB 87.
What Should Your Government Entity Do about GASB 87?
The short – get assistance to ensure correct lease accounting. As a CPA and advisory firm, it’s our job to stay abreast of changes to accounting standards and to apply them for our clients. We serve local governments with budgets ranging from $300,000 to $20 million. And we can help you as well. You can read more about our municipal offerings here.
But the best way to know about us and how we can serve you is to complete the form below. We can answer specific questions and/or set a time to talk with you.