In June 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 87, a new accounting and reporting standard regarding leases.
Under the new approach, GASB assumes all leases (with a few stated exceptions) are just leases, eliminating “operating” leases. The primary goal of the new standard is to increase comparability across governments and provide financial statement users with better, more complete information by establishing a single model for lease accounting. The new standard took effect for reporting periods beginning after December 15, 2019 and will apply retroactively as if the standard was in place at the beginning of the implementation period. The State Auditor’s Office strongly encourages early implementation.
The largest hurdle to anticipate with implementation will likely include gathering the required documents. This will require communication and support from all departments participating in leases with the finance and accounting departments. An additional hurdle will be the initial measurement calculations required by the standard.
For more information about what your local government can do to prepare, visit the State Auditor’s Office (SAO) website.