GASB 87 Lease - Lessee Right-to-Use Asset and Lease Liability Recognition
Recording the right-to-use (ROU) intangible asset and corresponding lease liability when a government enters into a lease as a lessee under GASB 87 (effective FY2022).
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Right-to-Use Lease Asset - Intangible (Gov-Wide) | Asset (+) | 850,000.00 | - |
| Lease Liability (Gov-Wide) | Liability (+) | - | 850,000.00 |
💡 Accountant's Note
GASB 87 (effective for fiscal years beginning after June 15, 2021) fundamentally changed lease accounting for governments — replacing GASB 13 and 62. Under GASB 87, lessees recognize an intangible right-to-use (ROU) asset and a corresponding lease liability for virtually all leases with a maximum possible term exceeding 12 months. The ROU asset is an intangible asset (not property/equipment) amortized over the shorter of the lease term or asset's useful life. This eliminated the operating/capital lease distinction — ALL leases (with minor exceptions) are on-balance-sheet. Common government leases: office space, vehicles, copiers, equipment.
Practitioner & Systems Framework
💻 ERP Architecture
GASB 87 adoption required governments to inventory ALL leases and determine measurement dates. The lease liability = present value of future lease payments, discounted at the government's incremental borrowing rate (IBR). The IBR determination for governments (which don't have commercial borrowing activity) required specific guidance — typically the rate on the most recent GO bond issuance. Many governments used a GASB 87 implementation tool or spreadsheet model.
⚠️ Audit Flags
GASB 87 adoption is still being reviewed for complete and accurate implementation (many governments adopted it for FY2022). Common implementation errors: missing leases (equipment leases, facility leases across departments), incorrect IBR, incorrect lease term (not including reasonably certain renewal options), and incorrect classification of short-term leases. Auditors request a complete lease inventory and test key assumptions.
📄 Required Documentation
Lease inventory (all contracts identified and evaluated), lease calculation worksheets (PV of payments by lease), IBR determination memo, GASB 87 note disclosure, short-term lease exemption documentation, lease terms summary by lease.
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