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GASB 87: lease term overview, importance and calculation

GASB 87 leases series: podcast 1

Authored by Susannah Filipovic

This Baker Tilly podcast provides an overview, explanation of importance and calculation of lease terms for public sector lessees and lessors under the Governmental Accounting Standards Board (GASB) Statement No. 87. The pronouncement – effective for reporting periods beginning in years after Dec. 15, 2019 – will change accounting and financial reporting for governmental leases.

Led by specialists from Baker Tilly’s public sector practice, the GASB 87 lease term podcast also walks governmental entities, such as municipalities, public utilities and other public sector organizations, through a lease term example from the lessee’s perspective and discusses triggering events that require a lease term to be reassessed.

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Steps to follow regarding lease terms

  • Identify whether or not your contract is a lease
  • Review the lease contract and determine the noncancelable period where no options are involved
  • Assess the options to terminate or extend the lease based on historical trends and economic conditions
  • If certain triggers events occur, reassess the lease term and re-measure the related lessee and lessor balance sheet items.

Why this matters

From both the lessee and lessor perspective, balance sheet reporting is based on the payment schedule over the lease term. Governments need to identify the lease term and then build the schedule of payments required during that term to value the lease liability for lessees and the lease receivable for lessors.

For more information on this topic, or to learn how Baker Tilly public sector specialists can help, contact our team.

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