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Lease Accounting Under GASB 87: The Guide to Hassle-Free Compliance
Which leases are subject to GASB 87
(and which are exempt)?
GASB 87 defines 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 an exchange or exchange-like
transaction."
We'll walk you through the highlights, but you can
review the official GASB 87 statement here.
Examples of leases subject to GASB 87 include:
Certain kinds of leases are exempt from GASB 87. These
include:
ظ Some intangible assets, such as licenses, patents,
and exploration rights for nonrenewable resources
ظ Supply contracts
ظ Service concession agreements
ظ Inventory
ظ Biological assets
For the most part under GASB 87, lessees must
recognize lease liability and an intangible right-to-use
lease asset, and lessors must recognize a lease receivable
and a deferred inflow of resources. However, in the
case of a few exceptions, certain leases have separate
guidance to follow.
Lessees don't need to recognize a lease liability and a
lease asset in the case of:
ظ Short-term leases
ظ Leases that transfer ownership of the underlying
asset
Additionally, lessors don't need to recognize a lease
receivable and a deferred inflow of resources in the case
of:
ظ Short-term leases
ظ Leases that transfer ownership of the underlying
asset
ظ Assets held as investments
ظ Certain regulated leases
In the case of short-term leases, they are defined as
having a maximum possible term of 12 months or less,
including options to extend. Lessees should instead
recognize short-term lease payments as outflows of
resources, and lessors should recognize them as inflows
of resources.
Tango Lease lets you separate your non-exempt leases
from your exempted leases and exception cases
that follow separate guidelines, keeping everything
organized appropriately and facilitating compliance with
GASB 87 standards.
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