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In April 2013, the Governmental Accounting Standards Board added "Lease Accounting – Reexamination of NCGA Statement No. 5 and GASB Statement No. 13" to the current agenda of projects to be further reviewed by the Board. The objective of this project is to reexamine issues related to lease accounting and consider whether improvements to current accounting guidance are necessary.
Accounting guidance related to lease accounting in the public sector environment is currently provided by the following:
Interesting to note that GASB Statement No. 62 incorporates the accounting guidance contained in FASB Statement No. 13, Accounting for Leases, as amended and interpreted, into the authoritative literature of the Governmental Accounting Standards Board.
In today's environment, governmental entities routinely enter into leases, many of which are considered to be operating leases, and therefore not recorded as long-term debt on a government organization's balance sheets, even though those operating leases represent long-term commitments of the governmental organization. Additionally, governments do not record the assets associated with the operating lease. This project intends to provide a basis for the Board to consider whether an operating lease meets the definitions of an asset or liability as defined in Concepts Statement No. 4, Elements of the Financial Statements.
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are currently considering significant revisions to private sector guidance over leases. The GASB believes that adding this project to the current agenda is prudent in order to follow the progress of the FASB and IASB in order to evaluate whether changes should also be adopted for organizations that follow GASB and allow the GASB to consider changes in a timely manner.
This GASB project is considering the following issues:
All governmental organizations that follow generally accepted accounting principles would be required to implement any guidance being issued as a result of this project.
Accounting guidance related to this current agenda item is still in the preliminary stages with final adoption of a new pronouncement not estimated until December 2015.
To learn more, connect with Dave Gannon at: (732) 283-9300 | firstname.lastname@example.org