Copyright © 2023 Tango. All rights reserved. 5
Lease Accounting Under GASB 87: The Guide to Hassle-Free Compliance
How to account for subleases and leaseback
transactions
In a sublease, the lessee becomes a lessor in order to
rent the leased asset to a new third party. When this
happens, the lessee of the original lease (now the lessor
of the sublease) must account for the original lease and
the sublease as separate transactions.
Leaseback transactions come in the form of either sale-
leasebacks or lease-leasebacks:
ظ A sale-leaseback occurs when an entity sells an asset
only to lease that asset back from the new lessor.
ظ A lease-leaseback occurs when an entity leases an
asset to a lessee only to lease a portion of that asset
back from the lessee, making each party both a
lessee and a lessor in their own respective portions.
In the case of a sale-leaseback, you should account for
the sale and lease portions of the transaction as separate
sale and lease transactions. However, you should report
any difference between the carrying value of the capital
asset that was sold and the net proceeds from the sale
as a deferred inflow of resources as a deferred outflow of
resources. Then recognize it over the term of the lease.
In the case of a lease-leaseback, you should account for
it as a net transaction. You'll need to disclose the gross
amounts of each portion of the transaction.
In Tango Lease, we'll walk you through the process,
perform the calculations, and create the accounting
schedules, keeping you effortlessly in compliance.
