By Ane Ohm on March 1, 2021 at 9:00 AM
GASB 87 is effective for fiscal years beginning after June 15, 2021, and all reporting periods thereafter—believe it or not, that’s right around the corner. If you haven’t started talking about and planning for GASB 87 implementation, now is the time to start.
From choosing a method for managing lease accounting (hint: the answer isn’t spreadsheets) to restating prior years, there’s plenty of work that CPA firms and entities can start doing today to ensure a successful implementation.
What makes GASB 87 different from the previous lease standard?
The biggest difference that entities will need to account for when implementing GASB 87 compared to the previous guidance (GASB 13 and GASB 62) relates to how leases are classified and recognized in financial statements.
What previously might have been considered operating or capital leases will now all be treated as finance leases, which is similar to a capital lease. For what was previously classified as an operating lease, this will have an effect on the Statement of Financial Position and balance sheet.
Short-term leases are defined as having a term at or under 12 months, including renewal options. These can continue to be reported solely on the income statement. Financial statement disclosures and schedules will be required for leases with a term that extends beyond 12 months.
Why spreadsheets won’t work for GASB 87
While entities could manage using spreadsheets for lease accounting in the past, they aren’t a viable solution for GASB 87 implementation and maintenance. Even though the lease standards are different, we learned during public company implementation of ASC 842 that spreadsheets aren’t the answer for the following reasons:
- Spreadsheets lack data integrity, version control, and security. Multiple people inside and outside an organization touch leases. If lease accounting is handled in a spreadsheet, it’s far too easy for team members to break the spreadsheet or enter erroneous data that might go unnoticed (but cause big problems).
- Spreadsheets take too much time to build and maintain. To be effective for lease accounting, spreadsheets need to be built with the right formulas and processes. That’s a time-consuming process for a document that can easily break.
- Spreadsheets drive audit fee pressure. When it comes time to audit GASB clients using spreadsheets, audits could take much longer because their spreadsheets lack controls for material weakness and could contain unanticipated errors.
Instead of relying on fragile spreadsheets to implement GASB 87, help your clients overcome these challenges by offering them an alternate solution.
Benefits of lease accounting software for GASB 87
If an entity still plans on using spreadsheets to implement GASB 87, it’s not too late to consider lease accounting software. Lease accounting software helps entities to overcome these challenges to make implementing the new lease standard simple and easy.
Benefits of lease accounting software include:
- Fast and easy lease modifications. Update existing lease terms in a few clicks—no more concerns about data integrity or broken calculations.
- Greater calculation accuracy. Skip building tedious Excel formulas—it’s already done for you. Tip: Look for software that comes with SOC I and II Type 2 reports and an Agreed-Upon Procedures (AUP) report to ensure accuracy, security, and privacy.
- Stronger security. Identify potential errors or unauthorized changes with version control, and enable access controls to ensure that only the people who need to update the numbers can do so.
- Guided workflow. Eliminate the guesswork and enter exactly the right information for the correct calculation, every time.
Start preparing for GASB 87 today
Successfully implementing the new lease accounting standard doesn’t happen at the last minute. By creating an implementation plan today, CPA firms and their clients can ensure a smooth transition to GASB 87.
LeaseCrunch lease accounting software makes GASB 87 implementation simple and easy. Discover how LeaseCrunch saves time and improves efficiency—request a demo today.