As a GovTech 100 company with more than 40 years of experience transforming the public sector, we understand the challenges facing governmental entities and design solutions to overcome them. That’s why we’re sharing this Implementation Guide to help organizations comply with GASB 87, the latest lease accounting standard issued by the Governmental Accounting Standards Board (GASB).
When thinking about GASB compliance, you should choose a software solution that will serve you over the long term with a range of features. Learn more about Civix Lease Management Software
What is GASB 87?
GASB 87 is the latest lease accounting and financial reporting standard issued by the GASB to “better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments,” according to the Statement.
Who does GASB 87 apply to?
The GASB is designed to provide taxpayers, legislators, municipal bond analysts, and others with information that is useful to their decision-making process regarding governmental entities. Thus, unless otherwise specified, all state and local governmental entities must comply with its pronouncements, including airports, public benefit corporations, public employee retirement systems, public utilities, hospitals, and colleges and universities, among others.
When should GASB 87 be implemented?
Originally, the requirements of GASB 87 were effective for reporting periods beginning after December 15, 2019. However, in May 2020, the GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance, which now requires the adoption of GASB 87 for all fiscal years beginning subsequent to June 15, 2021.
Implementation preparations should be well underway to meet the deadline and avoid consequences, such as SEC fines. With the right solution, entities can quickly implement GASB 87 and be compliant by the end of the fiscal year.
How to implement GASB 87
The Effective Date of GASB 87 is quickly approaching, and to be compliant, here are steps governmental entities should take:
1. Know the Requirements
Under GASB 87, governmental entities must recognize “certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract.” Accordingly, the Statement details what should be classified as a lease and, thus, what must be reported and recognized.
The GASB’s official Implementation Guide No. 2019-3 further provides “guidance that clarifies, explains, or elaborates on the requirements” regarding:
- Scope and Applicability of Statement 87
- Lease Term
- Short-Term Leases
- Contracts That Transfer Ownership
- Lessee Recognition and Measurement for Leases Other Than Short- Term Leases and Contracts That Transfer Ownership
- Notes to Financial Statements—Lessees
- Lessor Recognition and Measurement for Leases Other Than Short- Term Leases and Contracts That Transfer Ownership
- Notes to Financial Statements—Lessors
- Lease Incentives
- Contracts with Multiple Components
- Contract Combinations
- Lease Modifications and Terminations
- Sale-Leaseback Transactions
- Lease-Leaseback Transactions
- Intra-Entity Leases
With the abundance of information, it can be helpful to consult with experts. Our team at Civix includes leading public sector accountants who can provide guidance on how to:
- Evaluate Your Preparedness
- Discover a Library of Resources
- Validate Your Plan
- Leverage Software to Meet GASB 87 Requirements
2. Inventory and Catalogue Leases
A critical early step in ensuring all leases are classified according to the new Standard is to inventory them. While this may seem obvious, being thorough on the front end will save headaches on the backend.
Once you’ve compiled an inventory of lease contracts, you will need to recategorize them (for both lessee and lessor arrangements) according to the GASB 87 definition of a lease as “a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in exchange or exchange-like transaction.”
This can be a painstaking process, but it does not have to be. Civix offers an innovative import tool that makes it relatively quick and easy.
3. Implement a Lease Accounting Software
While the GASB 87 deadline is quickly approaching, it is not too late to meet it. At Civix, we’ve successfully launched our industry-leading lease management software to ensure GASB compliance for small- and mid-sized agencies within as little as three days and large cities and public authorities in as long as three weeks. Of course, the amount of time depends on the number of leases, but we’re confident that we can help any size organization meet the deadline if they act soon.
How to choose software solutions for GASB 87 implementation
With automated guidance, users don’t have to be experts in GASB requirements – it’s baked in.
Implementation can be as easy as 1, 2, 3
1. Choose a vendor that begins by understanding your needs and structures, and then configures your GASB solution accordingly.
2. Innovative import tools allow you to import all lease data at once – easily, quickly, and accurately. Then, all you do is validate it; and you won’t need to do anything else!
3. Software can automatically identify and segregate data between what’s required by GASB and what’s not.
Scalable for Any Agency
Beyond its ability to simplify compliance, the beauty of an enterprise GASB solution is that it can scale to meet the needs of states, cities, counties, school districts, and agencies alike.
With a centralized document center, GASB 87 software allows users to easily locate, access, assign roles to, and monitor electronic documents.
It also allows for bulk actions, such as mass updates. So if a policy changes (e.g., new lease terms and discount rates), you can automatically apply it to all appropriate agreements.
Bypass Procurement and Get the Best Price
Contracting vehicles like NCPA and GSA allow members to bypass lengthy procurement processes and get solutions at the best prices possible.
Short-Term Need, Long-Term Benefits
Since the adoption of GASB 87 and implementation of lease management software go hand in hand, it only makes sense to choose a software solution that will serve you over the long term with a range of features, such as:
Broad Functionality – Choose a software that provides a full spectrum of functionality beyond lease management, such as managing billing and invoicing, tenants, property and space, fixed revenue activity, and accounts receivable.
Automated Processes – It should automatically collect data elements within each lease to track components that are subject to GASB 87 compliance and apply the established rules. And robust software solutions should incorporate calendarized alerts and event notifications to automate recurring activities.
Seamless Integration – Select an application with standard extensible API hub for those that want to integrate with their general ledger.
Configurability – Make sure the system offers configurable landing pages, fields, reports and data sets.
Proven Success – Look for a solution that’s been real-world tested and is backed by a team of experts and licensed CPAs.
Secure – It should be hosted on a cloud region that is designed to meet the higher-level security and compliance needs for sensitive, dedicated, public sector workloads.
Of course, Civix offers software with all these features – and more. Our industry-leading Public Sector Business and Revenue Manager (PBRM) is a complete solution for managing government business operations effectively and complying with the requirements of GASB. Our integrated GASB module provides guidance that ensures compliance and manages an organization’s data for GASB 87, GASB 96, and beyond.
- Simplifying GASB Compliance Video Presentation
- GASB Software Info Sheet
- Lease Management System