Reporting Requirements for Annual Financial Reports of State Agencies and Universities
According to GASB 87, a lease is a contract that conveys control of the right to use (RTU) another entity’s nonfinancial asset (the underlying asset) as specified by the contract, for a period of time, in an exchange or exchange-like transaction. Leases include contracts that, although not explicitly identified as leases, meet this definition. GASB 87 establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Therefore, leases previously not reported on the balance sheet may now need to be added.
Under GASB 87, the:
- Lessee is required to recognize a lease liability and an intangible RTU lease asset
- Lessor is required to recognize a lease receivable and a deferred inflow of resources
Therefore, state agency lessees and lessors account for the same transaction in a way that mirrors how the other party accounts for it.
According to GASB 96, a subscription-based information technology arrangement (SBITA) is defined as a contract that conveys control of the RTU another party’s (a SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.
Under GASB 96, each agency must recognize an RTU subscription asset (an intangible asset) and a corresponding subscription liability.
Additionally, GASB 96 requires each agency to disclose descriptive information about its SBITAs other than short-term SBITAs, such as:
- The amount of the subscription asset
- Accumulated amortization
- Other payments not included in the measurement of a subscription liability
- Principal and interest requirements for the subscription liability
- Other essential information.
For more information, see Note 8 – Leases and Sale, Disposal or Interagency Transfer of Capital Assets.