Avoiding Pain Points When Implementing GASB-87, Leases

February 10, 2021 | Article

By Eric Berman, CPA, CGMA and David Sundstrom, CPA, CIA

Now is the time that governments need to put together a plan to implement Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. Nearly every government has some leases, and in many cases, the leases are significant.

Here are a few of the common pain points governments may experience when it comes to GASB-87.

Eide Bailly has experience assisting clients with early GASB-87 implementation. Let us help you implement GASB-87 and avoid unnecessary pain points.

“I Can Get By Using a Spreadsheet”
Unless your government has fewer than 10 simple leases, a spreadsheet may not be enough. Spreadsheets cause problems for audits, are prone to math errors, have minimal review and may need to be rebuilt as lease conditions change. The cost of designing and maintaining the information in a spreadsheet will quickly exceed the benefit of implementing lease standard software.

“I Have Strong Policies and Procedures … I Hope”
Locating where lease documentation is in your government and what condition the documents are in may be a problem. After all, your documentation may be in multiple locations, be paper-based or even be illegible. The paperwork may be decades old for some leases.

Beyond the basic internal controls over authorized signatories on a lease, decisions may need to be made on:

  • Recordkeeping
  • Developing a list of authorized signatories on lease contracts
  • Discount rates, including who sets those rates and how often
  • Whether laws, regulations, ordinances, bond covenants, continuing disclosure and debt limits need to be updated due to the reporting of leases as a liability
  • Authorization for execution of options for renewals, extensions or terminations and capital asset threshold policies (which may be different from when liabilities are recognized)
  • Identification of components, including supplies for copiers, common area charges and similar
  • Identification and authorization to exercise options to purchase, modify or terminate a lease
  • Identification of incentives
  • Renewals and extensions

In many circumstances, allowing decentralized decision-making on leases may be fine. However, the more decentralized decisions are, the stronger internal controls over completeness of lease documents needs to be. Communication between operations and accounting will be vital.

Here's some suggested steps to phase your GASB-87 implementation.

“I Know a Lease When I See It … I Think”
You may think your government has a great handle on leases that it is a party to. In the immortal words of Lt. Columbo from the 1970’s television show, “just one more thing.” If your accounting system can be queried, look for recurring payments to the same party on a regular basis for about the same amount of money. Voila! You may have more leases than in your records.

“I Think I Have Enough Time. My Auditors Will Be Here in Two Weeks”
There is seemingly never enough time to implement new standards, let alone something as difficult as GASB-87. The Leases standard is difficult due to the integrated legal and accounting decisions needed.

Without software, identifying salient terms and conditions in leases and then using that information to calculate the elements needed is tedious. Furthermore, GASB-87 is not a “one and done” GAAP standard. This information needs to be maintained for as long as your government is party to a lease. In other words: likely forever.


How Can Eide Bailly Help?

We have an experienced team who knows about GASB-87 implementation. We have software tools that utilize machine learning, robotic process automation and other cloud-based software to help your government implement the new standard.

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