After a delay, the Governmental Accounting Standards Board’s (GASB) lease accounting standard, Statement 87, is finally imminent.

And a new standard, Statement 96, Subscription-Based Information Technology Arrangements, will soon be effective for subscription-based information technology arrangements (SBITA). This standard conceptually mirrors the lease accounting standard.

Below is an overview of both standards and ways your Tribal entity can prepare for implementation.

GASB Statement 87, Leases

Statement 87, Leases, is effective for fiscal years beginning after June 15, 2021, which essentially applies to fiscal years ending on or after June 30, 2022. This follows the GASB’s 18-month deferral of the effective date in response to the COVID-19 pandemic.

Provisions Covered in the Leases Standard

Statement 87 establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset.

For leases that aren’t determined to be short-term leases—generally with a maximum possible term of one year or less—a lessee is required to recognize a lease liability and an intangible right-to-use a lease asset. A lessor is required to recognize a lease receivable and a deferred inflow of resources.

The resulting lease assets and liabilities are generally then recorded at the present value of payments the lessee is expected to make during the lease term, adjusted for certain incentives and direct costs as outlined in the standard.

Steps to Prepare for Implementation

Statement 87 is effective for 2022 year-ends, but retroactive adoption is applicable to all periods presented. Tribal entities that issue comparative financial statements will need to prepare fiscal 2021 data to allow for proper retroactive reporting.