Understanding gasb statement number 87 leases Understanding gasb statement number 87

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leases Who/what are GASB and GAAP? Definition of a lease Lessor requirements Improving the financial reporting of leases Reporting periods beginning after December 15, 2019

What is GAAP? Proper accounting Decades of accounting practice No authoritative book

What is GAAP? Does not account for every situation Make the best choice Rule makers leave room for options

What is GAAP? The grey area of materiality Qualitative aspects Quantitative aspects

Who Sets Up GAAP? GASB sets the GAAP rules GASB provides: Accounting principles Interpretations Guidance for implementation

GASB Statement No. 76 Category A Category B GASB Statements GASB Technical Bulletins GASB Implementation Guides American Institute of Certified Public Accountants (AICPA) literature cleared by GASB

GASB Statement No. 76 If not Specified in Category A or B AICPA literature not cleared by the GASB Practices widely practiced by state and local government agencies Literature from professional organizations, regulatory agencies, and authoritative accounting texts

leases GASB Statement No. 87

definition Financing of the right to use an underlying asset (nonfinancial asset) As specified in the contract for a period of time An exchange or exchange-like transaction Contracts meeting this definition are accounted for under lease guidance

Nonfinancial asset examples Buildings Land Vehicles Equipment

Lessee and lessor GASB Statement No. 87

Lessee and Lessor Lessee required to: Lessor required to: Record a lease liability Have an intangible right-to-use lease asset Lessor required to: Recognize a lease receivable Recognize deferred inflow of resources

Lease term A period during which a lessee has noncancelable right to use an underlying asset Plus the following periods, if applicable:

Lessee Lease term Periods covered by a lessee’s option to: Extend the lease if it is reasonably certain, based on all relevant factors, that the lessee will exercise that option Terminate the lease if it is reasonably certain, based on all relevant factors, that the lessee will not exercise that option

Lessor Lease term Periods covered by a lessor’s option to: Extend the lease if it is reasonably certain, based on all relevant factors, that the lessor will exercise that option Terminate the lease if it is reasonably certain, based on all relevant factors, that the lessor will not exercise that option

Fiscal funding or cancellation clause Affects the lease term if reasonably certain the clause will be exercised Lessee or lessor reassess the lease term only if one or more of the following occur:

Reassessing the lease term Lessee or lessor exercises an option even though previously reasonably certain was not Lessee or lessor does not exercise an option even though previously reasonably certain was Event specified in the contract requiring an extension or termination of the lease

Short-term leases Defined: a lease that, at the commencement of the lease term, Has a maximum possible term under the lease contract of 12 months (or less), Including any options to extend, regardless of their probability of begin exercised

Short-term leases Lessees and lessors recognize short-term lease payments As outflows (lessees) or inflows (lessors) of resources Based on the payment provisions of the lease contract

Lessee accounting Recognize a lease liability and a lease asset at commencement of the lease term unless: A short-term lease Or it transfers ownership of the underlying asset

Lessee accounting Measured at the present value of payments expected to be made during the lease term Less any lease incentives Measured at the amount of the initial measurement of the lease liability Plus any payments made to the lessor At or before commencement of the lease term and certain direct costs

Lessee accounting Reduce the lease liability as payments are made Recognize an outflow of resources (expense) for interest on the liability Amortize the lease asset in a systematic and rational manner Over the shorter of the lease term or the useful life of the underlying asset

Lessee accounting Notes to the financial statements includes: A description of leasing arrangements The amount of lease assets recognized Schedule of future lease payments to be made

Lessor accounting Recognize a lease receivable and a deferred inflow of resources at commencement of the lease term except: Leases of assets held as investments Certain regulated leases Short-term leases Leases that transfer ownership of the underlying asset

Lessor accounting Should not derecognize the asset underlying the lease Lease receivable measured at the present value of lease payments expected to be received during the lease term Deferred inflow of resources measured at value of the lease receivable Plus payments received at or before commencement relating to future periods

Lessor accounting Recognize interest revenue on the lease receivable An inflow of resources (revenue) from the deferred inflows of resources Systematically and rationally over the term of the lease

Lessor accounting Notes to the financial statements includes: A description of leasing arrangements Total amount of inflows of resources recognized from leases

Contracts with multiple components and contract combinations GASB Statement No. 87

Contracts with multiple components and contract combinations Account for lease and nonlease components of a lease as separate contracts Multiple underlying assets accounted as separate lease contracts Use contract prices for individual components If an estimate is not practicable, account for multiple components as a single lease unit

Lease modifications and terminations GASB Statement No. 87

Lease modifications and terminations Amendments to a lease contract is a lease modification Remeasure the lease liability (lessee) and lease receivable (lessor) If the lessee’s right to the use of the asset decrease, it is a partial or full lease termination The lease liability (lessee) and lease receivable (lessor) is recognized as a gain or loss

Subleases and leaseback transactions GASB Statement No. 87

Subleases transactions Treated as transactions separate from the original lease Original lessee becomes the lessor in a sublease Account for original lease (lessee) and sublease (lessor) as separate transactions

Sale-leaseback transactions The owner of a property (seller-lessee) sells the property and simultaneously leases it back from the purchaser-lessor The seller of the asset becomes the lessee and the purchaser becomes the lessor in this arrangement. Useful to untie the cash invested in an asset for other investments, but the asset is still needed in order to operate.

Sale-leaseback transactions A lease transaction that includes a sale The sale and lease portions of a transactions account as separate transactions Differences between the carrying value of the asset sold and net proceeds report as deferred inflow or outflow Recognized over the term of the lease

Effective date Reporting periods beginning after December 15, 2019. Earlier application is encouraged

Improving accounting and financial reporting Increases the usefulness of government’s financial statements reporting lease liabilities that are currently not reported Enhances comparability of financial statements among governments Required lessees and lessors to report leases under a single model Required notes to the financial statements enhances timing and significance of a government’s leasing arrangements

NextGen General Ledger Dataviewer Local Government Corporation

Dataviewer Tool Dataviewer is a tool used to create various types of spreadsheet style reports exportable to Excel, HTML. This program allows the user to manipulate the cells and column format to suit individual needs.

There are two different types of basic functions of Dataviewer within the NextGen (NG) software. Dataview Wizard which is where you create you reports. Dataview is where you can look at the data in your report formats.

Dataview Wizard

Dataview Wizard is found by logging into NG 1 Dataview Wizard is found by logging into NG 1. Choosing financial management, 2. Reporting 3. Dataview Wizard

Dataview Types

Choose the type of report you want to create a spreadsheet for

Options for Adding and Moving Your Report Columns

Select the columns desired and click once on “Add” to add to the Selected Column(s).

Changing Column Names Click on Next Click on column names and change them to what is desired. Click on Next

Name the report and give it a description. Click on Next and Finish The newly created revenue and expense report named “Budget Status Analysis” is now ready to be used in Dataview.

Dataview

Dataviews are found by logging onto NG, choosing financial management, and Dataviews..

Fill in the General tab information. For this example click on the 101 General fund box. If you see a red shield icon, it is a required field and must be filled in.

Click on the Advanced tab. For this example click on the Expenditures box. Click on Next to produce the report.

Right click on the % Used header and choose format. Choose Percentage and OK .

Notice the numbers underneath the % Used header changed to percents

Questions?