By LeaseCrunch® on March 9, 2022 at 9:56 AM
You might know what GASB 87 is, but when it comes to making your lease accounting practices GASB 87-compliant, are you really hitting the ball out of the park? Read on for a GASB 87 implementation guide that includes a refresh on what GASB 87 requires of all US state and local governments (just in case you forgot), as well as tips for proper implementation of this new method of lease documentation.
Who Does GASB Apply To?
The generally accepted accounting principles (GAAPs) outlined by the Governmental Accounting Standards Board (GASB) must be followed by US state and local governments. Depending on the circumstances, it also can apply to certain non-profit organizations and municipal entities such as airports.
These principles and standards are not only recognized as authoritative by state and local governments, but also by entities such as state boards of accountancy and the American Institute of Certified Public Accountants (AICPA).
What is GASB 87?
GASB 87 is a statement that was issued by the GASB that requires the recognition of all an entity’s lease assets and liabilities that exceed 12 months in length. These assets and liabilities must now be recorded as liabilities and right-of-use assets on financial statements.
Furthermore, GASB 87 expands the breadth of the leases that have to be accounted for in a way similar to how capital leases were previously documented. However, the title and concept of a “capital lease” has now been eliminated and replaced with the idea that all leases are recognized purely by the fact that they are financings of the right to use an asset.
What is the Effective Date of GASB 87? When Must GASB 87 Be Implemented?
GASB 87 is effective for fiscal years starting after June 15, 2021. Any entity with qualifying leases must document them as GASB 87 leases under the single model of lease accounting layed out in the GASB 87 declaration.
It is important to remember that GASB requires prior years of financial statements to be restated in this new formatting when issuing comparative financial statements.
How Do I Prepare for GASB 87? A GASB 87 Implementation Guide
1. Familiarize Yourself with the New Guidelines
One of the first and most important parts of properly implementing the new lease standard is reading GASB 87 itself.
All new lease accounting standards released by the GASB can be found on their website. The GASB 87 statement can be found here.
2. Compile a Lease Inventory
In order to ensure that all of your leases are documented according to the new lease standard, it is important to make a list of all of them so you don’t miss any. Pay particular attention to “embedded” leases, or leases that are components of contracts which entail the use of a certain asset. Oftentimes, these types of leases can be difficult to identify, which is why making a list of leases can be beneficial in ensuring complete compliance.
3. Implement a Lease Accounting Software
The next step in our GASB 87 implementation guide is to find and implement a lease accounting software. These programs boost accounting productivity and speed, and reduce risk and error. Some can even automatically create perfect spreadsheets (more on that later).
Make sure you have a lease accounting software picked out and ramped up before the GASB 87 deadline to account for a slight adjustment period in process change.
4. Put Your Inventory List in the Software
The last step of our GASB 87 implementation guide involves simply putting the previously compiled list of leases and putting it through your lease accounting software.
Doing this will do three things: Ensure that you have no errors in your list of leases, make calculating journal entries later a breeze, and make the transition to the new lease standard very easy.
Don’t know where to start with finding a lease accounting software to help you maintain compliance with GASB 87? You’re in the right place.
More About LeaseCrunch
To avoid the errors that might arise from having to manually account for the complicated and constantly changing GASB statements, think about utilizing lease accounting software, like LeaseCrunch, to make accounting faster and less risky.
LeaseCrunch software makes balance sheet calculations easy and utilizes automation to provide accurate and compliant deliverables. Just some of the benefits of using LeaseCrunch include:
- A fast implementation process: We offer in-app help links and a “wizard” to guide you through the process of set-up.
- An easy-to-use design: With LeaseCrunch, you don’t have to compromise between easy and accurate accounting. Our software crunches the hard numbers, and does so with accuracy.
- Accuracy and compliance: Data validation checks are integrated into our software to ensure compliance with accounting standards.
- Exportation into spreadsheets: Are you hesitant to rely completely on technology? Our software allows you to export calculations into spreadsheets and use them in the format you find most comfortable.
Aren’t convinced yet that lease accounting software is for you? Sign up for a free demo and see our software in action instead. We look forward to helping you stay compliant with GASB guidelines in addition to providing this GASB 87 implementation guide.