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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Universities

Leases — Recognitions and Measurements
For Lessees

The following entries relate to lessee recognition and measurement for leases other than short-term leases and contracts that transfer ownership.

According to Implementation Guide No. 2023-1, Implementation Guidance Update—2023:

Q—A government leases a building. The lease term is 10 years. At the commencement of the lease, the government provides the first three payments and recognizes a liability for the present value of the remaining seven payments, which will be paid starting in the fourth year of the lease. Should the government recognize interest expense during each of the first three years of the lease?

A—Yes. In accordance with paragraph 24 of GASB 87, interest expense represents the amortization of the discount on the lease liability. That discount should be amortized over the entire lease term, including each of the first three years during which the government is not making payments. The interest liability will continue to accrue until the government starts making payments in the fourth year.

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Governmental Activities [+]

The following entries for governmental activities record a leased asset and the lease obligation. All entries must be completed for leases and the associated intangible right to use assets to be recorded correctly. The recorded amounts are based on the Amortization Schedule Example table shown at the end of this section.

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To Record Capital Outlay Expenditures at the Inception in governmental funds (FT01, FT02, FT03, FT04)
(1) 5 U XXXXCY XXX 632 CY 99999 7329 $ 27,452,605.07   XXXX 9999
To Record Increase in Lease Obligations at the Inception in governmental funds (FT01, FT02, FT03, FT04)
(2) 5 U XXXXCY XXX 657 CY 99999 3893 $ 27,452,605.07   XXXX 9999
To Reclass the Lease Payments to Debt Service Principal and Interest Expenditures in governmental funds (FT01, FT02, FT03, FT04)
(3) 5 U 0832CY XXX 633 CY 99999 7XXX $ 2,527,318.57   XXXX 9999
To Record Debt Service Interest Expenditures in governmental funds (FT01, FT02, FT03, FT04)
(4) 5 U 0832CY XXX 632 CY 99999 7802 $ 730,490.60   XXXX 9999
To Record Debt Service Principal Expenditures in governmental funds (FT01, FT02, FT03, FT04)
(5) 5 U 0832CY XXX 632 CY 99999 7339 $ 1,796,8727.97   XXXX 9999
To Record the NC Lease Liability and Reclass the Increase in Lease Obligations in Basis Conversion Funds (FT12)
(6) 5 U 0832CY XXX 516 CY 99999 3893 $ 27,452,605.07   XXXX 1719
To Record the Intangible Right-to-Use Lease Asset and Reclass the Capital Outlay Expenditures in Basis Conversion Funds (FT11)
(7) 5 U 0832CY XXX 513 CY 99999 7329 $ 27,452,605.07   XXXX 06XX
To Reduce the Reduction in Lease Liability and Reclass the Debt Service Principal Expenditures in Basis Conversion Funds (FT12)
(8) 5 U 0832CY XXX 503 CY 99999 7339 $ 1,796,827.97   XXXX 1719
To Record the Portion of Current Lease Liability (due within 1 year) in Basis Conversion Funds (FT12)
(9) 5 U 0832CY XXX 537 CY 99999 N/A $ 2,114,668.00   XXXX 1629
To Reduce Non-Current Lease Liability by Amount of Current Lease Liability (due within 1 year) in Basis Conversion Funds (FT12)
(10) 5 U 0832CY XXX 537 CY 99999 N/A $ 2,114,668.00 R XXXX 1719
To Record the Accrued Interest Payable in Basis Conversion Funds (FT12)
(11) 5 U 0832CY XXX 503 CY 99999 7802 $ 63,260.83 R XXXX 1610
To Record Amortization of the Right to Use Asset (FT11)
(12) 5 U 0832CY XXX 512 CY 99999 7885 $ 2,656,703.76   XXXX 06XX

Accounting effect of above entries:

Debit Credit
(1) To Record Capital Outlay Expenditures at the Inception in governmental funds (FT01, FT02, FT03, FT04)    
  5600 GAAP Expenditure Offset $ 27,452,605.07  
  9999 System Clearing   $ 27,452,605.07 
(2) To Record Increase in Lease Obligations at the Inception in governmental funds (FT01, FT02, FT03, FT04)    
  9999 System Clearing $ 27,452,605.07  
  6035 Other Financing Sources   $ 27,452,605.07
(3) To Reclass the Lease Payments to Debt Service Principal and Interest Expenditures in governmental funds (FT01, FT02, FT03, FT04)    
  9999 System Clearing $ 2,527,318.57  
  5600 GAAP Expenditure Offset**   $ 2,527,318.57
(4) To Record Debt Service Interest Expenditures in governmental funds (FT01, FT02, FT03, FT04)    
  5600 GAAP Expenditure Offset $ 730,490.60  
  9999 System Clearing   $ 730,490.60
(5) To Record Debt Service Principal Expenditures in governmental funds (FT01, FT02, FT03, FT04)    
  5600 GAAP Expenditure Offset $ 1,796,827.97  
  9999 System Clearing   $ 1,796,827.97
(6) To Record the NC Lease Liability and Reclass the Increase in Lease Obligations in Basis Conversion Funds (FT12)    
  6135 BC – Other Financing Sources $ 27,452,605.07  
  1719 BC – NC Right to Use Lease Obligations   $ 27,452,605.07
(7) To Record the Intangible Right-to-Use Lease Asset and Reclass the Capital Outlay Expenditures in Basis Conversion Funds (FT11)    
  06XX Intangible Right to Use Lease Asset* $ 27,452,605.07  
  5650 BC – Expenditure Control   $ 27,452,605.07
(8) To Reduce the Reduction in Lease Liability and Reclass the Debt Service Principal Expenditures in Basis Conversion Funds (FT12)    
  1719 BC – NC Right to Use Lease Obligations $ 1,796,827.97  
  5650 BC – Expenditure Control   $ 1,796,827.97
(9) To Record the Portion of Current Lease Liability (due within 1 year) in Basis Conversion Funds (FT12)    
  9992 BC – System Clearing $ 2,114,668.00  
  1629 BC – CL Right to Use Lease Obligations   $ 2,114,668.00
(10) To Reduce Non-Current Lease Liability by Amount of Current Lease Liability (due within 1 year) in Basis Conversion Funds (FT12)    
  1719 BC – NC Right to Use Lease Obligations $ 2,114,668.00  
  9992 BC – System Clearing   $ 2,114,668.00
(11) To Record the Accrued Interest Payable in Basis Conversion Funds (FT12)    
  5650 BC – Expenditure Control $ 63,260.83  
  1610 BC – CL Interest Payable   $ 63,260.83
(12) To Record Amortization of the Right to Use Asset in Basis Conversion Funds (FT11)    
  5650 BC – Expenditure Control $ 2,656,703.76  
  06XX BC – Right to Use Lease Asset Amortization*   $ 2,656,703.76

*Use the following GLs to record right to use lease assets in suffix number 7 and related accumulated amortization in suffix number 12:

  • 0621 Right to Use Asset – Land
  • 0622 Right to Use Asset – Land - Amortization
  • 0623 Right to Use Asset – Buildings
  • 0624 Right to Use Asset – Buildings - Amortization
  • 0631 Right to Use Asset – Facilities
  • 0632 Right to Use Asset – Facilities - Amortization
  • 0636 Right to Use Asset – Infrastructure
  • 0637 Right to Use Asset – Infrastructure - Amortization
  • 0648 Right to Use Asset – Equipment
  • 0649 Right to Use Asset – Equipment - Amortization
  • 0658 Right to Use Asset – Vehicles
  • 0659 Right to Use Asset – Vehicles - Amortization

**Use the following COBJs in suffix number 3 to reclass the lease payments:

  • 7401 Rental of Radio Towers
  • 7406 Rental of Furnishings/Equipment
  • 7411 Rental of Computer Equipment
  • 7415 Rental of Computer Software
  • 7421 Rental of Reference Material
  • 7442 Rental of Motor Vehicles
  • 7443 Rental of Aircraft – Exempt
  • 7445 Rental of Aircraft
  • 7449 Rental of Marine Equipment
  • 7461 Rental of Land
  • 7462 Rent of Office Building/Office Space
  • 7468 Rental of Service Buildings
  • 7470 Rental of Space
  • 7522 Telecoms – Equipment Rental

Amortization Schedule Example

Amortization Schedule with borrowing rate: 3 % — Total Fixed Payments ( )
Building – 1620 L ST, Austin, TX
Year Month Cash Interest Expense Liability Reduction Accrued Interest Cumulative Accrued Interest Liability Total Liability ST Lease Liab. LT Lease Liab. Amortization Expense Net Asset Balance Accumulated Amortization Gross Asset Balance
2021 September 178,719.03 65,008.99 178,719.03 65,008.99 65,008.99 27,273,886.04 1,788,929.70 25,484,956.34 221,391.98 27,231,213.10 221,391.98 27,452,605.07
2021 October 179,631.79 69,215.26 112,381.11 1,964.59 66,973.57 27,161,504.93 1,850,836.01 25,310,668.92 221,391.98 27,009,821.12 442,783.95 27,452,605.07
2021 November 179,631.79 66,710.37 110,425.76 -2,495.66 64,477.91 27,051,079.17 1,913,047.09 25,138,032.08 221,391.98 26,788,429.14 664,175.93 27,452,605.07
2021 December 179,631.79 68,646.21 112,930.50 1,944.92 66,422.83 26,938,148.67 1,975,259.45 24,962,889.22 221,391.98 26,567,037.17 885,567.91 27,452,605.07
2022 January 179,631.79 68,363.24 110,994.86 -273.69 66,149.15 26,827,153.81 2,037,787.55 24,789,366.26 221,391.98 26,345,645.19 1,106,959.88 27,452,605.07
2022 February 231,336.79 61,377.52 162,982.67 -6,976.60 59,172.54 26,664,171.13 2,048,769.97 24,615,401.16 221,391.98 26,124,253.22 1,328,351.86 27,452,605.07
2022 March 231,336.79 67,519.74 169,972.67 6,155.62 65,328.16 26,494,198.46 2,059,275.20 24,434,923.27 221,391.98 25,902,861.24 1,549,743.83 27,452,605.07
2022 April 232,629.42 64,934.58 165,123.65 -2,571.19 62,756.97 26,329,074.81 2,070,344.68 24,258,730.13 221,391.98 25,681,469.26 1,771,135.81 27,452,605.07
2022 May 232,629.42 66,671.51 167,708.41 1,750.51 64,507.48 26,161,366.40 2,081,272.20 24,080,094.20 221,391.98 25,460,077.29 1,992,527.79 27,452,605.07
2022 June 234,046.66 64,108.50 167,388.93 -2,549.23 61,958.25 25,993,977.46 2,092,433.14 23,901,544.32 221,391.98 25,238,685.31 2,213,919.76 27,452,605.07
2022 July 234,046.66 65,812.17 169,951.92 1,717.43 63,675.68 25,824,025.54 2,103,450.55 23,720,574.99 221,391.98 25,017,293.33 2,435,311.74 27,452,605.07
2022 August 234,046.66 65,383.34 168,248.46 -414.86 63,260.82 25,655,777.09 2,114,668.00 23,541,109.08 221,391.98 24,795,901.36 2,656,703.72 27,452,605.07
Totals 2,527,318.59 793,751.43 1,796,827.97 63,260.83 2,656,703.76

Business-Type Activities (FT05) and Component Units (FT15) [+]

The following entries for business-type activities record a leased asset and the lease obligation. All entries must be completed for leases and the associated intangible right to use assets to be recorded correctly. The recorded amounts are based on the Amortization Schedule Example table shown at the end of this section.

Seq No Batch Type Doc Type Eff Date Fin Agy TC AY PCA COBJ Amount R Fund Input GL
To Record Non-Current Right to Use Lease Asset at the Inception
(1) 5 U 0832CY XXX 644 CY 99999 N/A $ 27,452,605.07   XXXX 03XX
To Record Non-Current Right to Use Lease Liability at the Inception
(2) 5 U 0832CY XXX 645 CY 99999 N/A $ 27,452,605.07   XXXX 1219
To Reclass the Lease Payments to Reduce the Lease Liability and Record the Interest
(3) 5 U 0832CY XXX 633 CY 99999 7XXX $ 2,527,318.57   XXXX 9999
To Record the Interest Portion of Lease Payments
(4) 5 U 0832CY XXX 632 CY 99999 7802 $ 793,751.43   XXXX 9999
To Reduce the Lease Liability by Principal Portion of Lease Payments
(5) 5 U 0832CY XXX 644 CY 99999 N/A $ 1,796,8727.97   XXXX 1219
To Record the Accrued Interest Payable
(6) 5 U 0832CY XXX 645 CY 99999 N/A $ 63,260.83   XXXX 1110
To Record the Current Portion of Lease Obligation (due within 1 year)
(7) 5 U 0832CY XXX 647 CY 99999 N/A $ 2,114,668.00   XXXX 1129
To Reduce Non-Current Lease Liability by Amount of Current Lease Liability (due within 1 year)
(8) 5 U 0832CY XXX 647 CY 99999 N/A $ 2,114,668.00 R XXXX 1219
To Record Amortization of the Right to Use Asset
(9) 5 U 0832CY XXX 632 CY 99999 7885 $ 2,656,703.76   XXXX 03XX

Accounting effect of above entries:

Debit Credit
(1) To Record Non-Current Right to Use Lease Asset at the Inception    
  03XX NC Right to Use Asset* $ 27,452,605.07  
  9999 System Clearing   $ 27,452,605.07 
(2) To Record Non-Current Right to Use Lease Liability at the Inception    
  9999 System Clearing $ 27,452,605.07  
  1219 NC Right to Use Lease Obligations   $ 27,452,605.07
(3) To Reclass the Lease Payments to Reduce the lease Liability and Record Interest    
  9999 System Clearing $ 2,527,318.57  
  5600 GAAP Expenditure Offset**   $ 2,527,318.57
(4) To Record the Interest Portion of Lease Payments    
  5600 GAAP Expenditure Offset $ 793,751.43  
  9999 System Clearing   $ 793,751.43
(5) To Reduce the Lease Liability by Principal Portion of Lease Payments    
  1219 NC Right to Use Lease Obligations $ 1,796,827.97  
  9999 System Clearing   $ 1,796,827.97
(6) To Record the Accrued Interest Payable    
  9999 System Clearing $ 63,260.83  
  1110 Interest Payable   $ 63,260.83
(7) To Record the Current Portion of Lease Obligation (due within 1 year)    
  9999 System Clearing $ 2,114,668.00  
  1129 CL Right to Use Lease Obligations   $ 2,114,668.00
(8) To Reduce Non-current Lease Obligation by Amount of Current Lease Obligation (due within 1 year)    
  1219 NC Right to Use Lease Obligations $ 2,114,668.00  
  9999 System Clearing   $ 2,114,668.00
(9) To Record Amortization of the Right to Use Asset    
  5600 GAAP Expenditure Offset $ 2,656,703.76  
  03XX BC – Right to Use Asset – Amortization*   $ 2,656,703.76

*Use the following GLs to record right to use lease assets in the first suffix and related accumulated amortization in suffix number 9:

  • 0321 Right to Use Asset – Land
  • 0322 Right to Use Asset – Land - Amortization
  • 0323 Right to Use Asset – Buildings
  • 0324 Right to Use Asset – Buildings - Amortization
  • 0331 Right to Use Asset – Facilities
  • 0332 Right to Use Asset – Facilities - Amortization
  • 0336 Right to Use Asset – Infrastructure
  • 0337 Right to Use Asset – Infrastructure - Amortization
  • 0348 Right to Use Asset – Equipment
  • 0349 Right to Use Asset – Equipment - Amortization
  • 0358 Right to Use Asset – Vehicles
  • 0359 Right to Use Asset – Vehicles - Amortization

**Use the following COBJs in suffix number 3 to reclass the lease payments:

  • 7401 Rental of Radio Towers
  • 7406 Rental of Furnishings/Equipment
  • 7411 Rental of Computer Equipment
  • 7415 Rental of Computer Software
  • 7421 Rental of Reference Material
  • 7442 Rental of Motor Vehicles
  • 7443 Rental of Aircraft – Exempt
  • 7445 Rental of Aircraft
  • 7449 Rental of Marine Equipment
  • 7461 Rental of Land
  • 7462 Rent of Office Building/Office Space
  • 7468 Rental of Service Buildings
  • 7470 Rental of Space
  • 7522 Telecoms – Equipment Rental

Amortization Schedule Example

Amortization Schedule with borrowing rate: 3 % – Total Fixed Payments ( )
Building – 1620 L ST, Austin, TX
Year Month Cash Interest Expense Liability Reduction Accrued Interest Cumulative Accrued Interest Liability Total Liability ST Lease Liab. LT Lease Liab. Amortization Expense Net Asset Balance Accumulated Amortization Gross Asset Balance
2021 September 178,719.03 65,008.99 178,719.03 65,008.99 65,008.99 27,273,886.04 1,788,929.70 25,484,956.34 221,391.98 27,231,213.10 221,391.98 27,452,605.07
2021 October 179,631.79 69,215.26 112,381.11 1,964.59 66,973.57 27,161,504.93 1,850,836.01 25,310,668.92 221,391.98 27,009,821.12 442,783.95 27,452,605.07
2021 November 179,631.79 66,710.37 110,425.76 -2,495.66 64,477.91 27,051,079.17 1,913,047.09 25,138,032.08 221,391.98 26,788,429.14 664,175.93 27,452,605.07
2021 December 179,631.79 68,646.21 112,930.50 1,944.92 66,422.83 26,938,148.67 1,975,259.45 24,962,889.22 221,391.98 26,567,037.17 885,567.91 27,452,605.07
2022 January 179,631.79 68,363.24 110,994.86 -273.69 66,149.15 26,827,153.81 2,037,787.55 24,789,366.26 221,391.98 26,345,645.19 1,106,959.88 27,452,605.07
2022 February 231,336.79 61,377.52 162,982.67 -6,976.60 59,172.54 26,664,171.13 2,048,769.97 24,615,401.16 221,391.98 26,124,253.22 1,328,351.86 27,452,605.07
2022 March 231,336.79 67,519.74 169,972.67 6,155.62 65,328.16 26,494,198.46 2,059,275.20 24,434,923.27 221,391.98 25,902,861.24 1,549,743.83 27,452,605.07
2022 April 232,629.42 64,934.58 165,123.65 -2,571.19 62,756.97 26,329,074.81 2,070,344.68 24,258,730.13 221,391.98 25,681,469.26 1,771,135.81 27,452,605.07
2022 May 232,629.42 66,671.51 167,708.41 1,750.51 64,507.48 26,161,366.40 2,081,272.20 24,080,094.20 221,391.98 25,460,077.29 1,992,527.79 27,452,605.07
2022 June 234,046.66 64,108.50 167,388.93 -2,549.23 61,958.25 25,993,977.46 2,092,433.14 23,901,544.32 221,391.98 25,238,685.31 2,213,919.76 27,452,605.07
2022 July 234,046.66 65,812.17 169,951.92 1,717.43 63,675.68 25,824,025.54 2,103,450.55 23,720,574.99 221,391.98 25,017,293.33 2,435,311.74 27,452,605.07
2022 August 234,046.66 65,383.34 168,248.46 -414.86 63,260.82 25,655,777.09 2,114,668.00 23,541,109.08 221,391.98 24,795,901.36 2,656,703.72 27,452,605.07
Totals 2,527,318.59 793,751.43 1,796,827.97 63,260.83 2,656,703.76