Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Universities

Leases — Recognitions and Measurements

At the start of the lease term:

• The lessee must recognize a lease liability and an intangible right-to-use (RTU) lease asset, unless the lease is a short-term lease or it transfers ownership of the underlying asset.
• The lessor must recognize a lease receivable and a deferred inflow of resources with certain exceptions for:
  • Leases of assets held as investments
  • Certain regulated leases
  • Short-term leases
  • Leases that transfer ownership of the underlying asset

Report a contract that transfers ownership as a financed purchase by the lessee and a sale by the lessor if the contract:

• Transfers ownership by the end of the contract
  –AND–
• Does not contain termination options (other than a fiscal funding or cancellation clause that is not reasonably certain of being exercised)

Leases between the state agencies (governmental or business-type activities) and a discretely-presented component unit are covered by GASB 87. The contract is treated like any other lease arrangement. However, the related lease receivables and payables must not be combined with other amounts due to or due from discretely presented component units or with lease receivables and payables involving external parties.

Leases between state agencies and a blended component unit are not covered by GASB 87 because the assets or liabilities of the blended component unit are the assets and liabilities of the state agency. For leases with blended component units (or between blended component units), any required eliminations must be made before the blended component units are aggregated with the governmental or business-type activities. Report any remaining cash payments between component units as inflows of resources and outflows of resources. If the blended component unit issues stand-alone financial statements, it must apply lease accounting in those separate statements, as applicable.