GASB has proposed a single approach for lease reporting. State and local governments would report leases based on the principle that leases are financings of the right to use an underlying asset. The proposal would provide guidance for lease contracts for nonfinancial assets such as vehicles, heavy equipment and buildings. It would not apply to grants, donated assets or leases of intangible assets. The limited exceptions in the draft guidance include financed purchases and short-term leases of 12 months or less.
The exposure draft would require a lessee government to recognize a lease liability and an intangible asset representing its right to use the leased asset. A lessor government would be required to recognize a lease receivable and a deferred inflow of resources.
Under the proposal, a lessee would also report:
-Amortization expense related to the lease asset, recognizing the asset amount as an expense over the term of the lease.
-Interest expense related to the liability.
-Note disclosures with information about the lease, including a general description of the leasing arrangement.
The proposal would also require a lessor to report:
-Lease revenue and a corresponding reduction in the deferred inflow over the term of the lease.
-Interest revenue related to the receivable.
-Note disclosure with information about the lease, including a general description of the leasing arrangement.
VACo Contact: Vicky Steinruck