Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Universities
Leases — Recognitions and Measurements
Terminations
The lessee and lessor must account for an amendment during the reporting period resulting in a decrease in the lessee’s right to use the underlying asset as a partial or full lease termination. For example: the lease term is shortened or the number of underlying assets is reduced.
Lessees
A lessee must account for the partial or full lease termination by reducing the carrying values of the lease asset and lease liability and recognizing a gain or loss for the difference.
However, if the lease is terminated because the lessee purchased an underlying asset from the lessor, the lease asset must be reclassified to the appropriate class of owned asset.
Lease Termination – Governmental Activities
The following entries for governmental activities record the termination of a lease contract. In order to be recorded correctly, all entries must be completed for:
- Lease obligations
- Accumulated amortization
–AND– - Associated Right to Use (RTU) assets
| Seq No | Batch Type | Doc Type | Eff Date | Fin Agy | TC | AY | PCA | COBJ | Amount | R | Fund | Input GL |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FT12 Record Termination of BC RTU Obligation | ||||||||||||
| (1) | 5 | U | XXXCY | XXX | 534 | CY | 99999 | Blank | $ XXX.XX | XXX | 1719 | |
| FT01, 02, 03, 04 Record Gain on Termination of Lease Obligation | ||||||||||||
| (2) | 5 | U | XXXCY | XXX | 516 | CY | 99999 | 3834 | $ XXX.XX | R | XXXX | 9992 |
| FT11 Record Reduction of Accumulated Amortization | ||||||||||||
| (3) | 5 | U | 0832CY | XXX | 534 | CY | 99999 | Blank | $ XXX.XX | XXXX | 06XX | |
| FT11 Reverse Historical Cost of RTU Asset | ||||||||||||
| (4) | 5 | U | 0832CY | XXX | 535 | CY | 99999 | Blank | $ XXX.XX | XXXX | 06XX | |
| Record Loss on Termination of RTU Asset | ||||||||||||
| (5) | 5 | U | 0832CY | XXX | 516 | CY | 99999 | 3834 | $ XXX.XX | XXXX | 9992 | |
Lease Termination – Business-Type Activities
The following entries for business-type activities record the termination of a lease contract. In order to be recorded correctly, all entries must be completed for:
- Lease obligations
- Accumulated amortization
–AND– - Associated RTU assets
| Seq No | Batch Type | Doc Type | Eff Date | Fin Agy | TC | AY | PCA | COBJ | Amount | R | Fund | Input GL |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FT05, 15 Record Termination of RTU obligation | ||||||||||||
| (1) | 5 | U | XXXCY | XXX | 644 | CY | 99999 | Blank | $ XXX.XX | XXX | 1129/1219/1124 or 1224 |
|
| FT05, 15 Record Gain on Termination of Lease Obligation | ||||||||||||
| (2) | 5 | U | XXXCY | XXX | 657 | CY | 99999 | 3834 | $ XXX.XX | XXXX | 9999 | |
| FT05, 15 Record Reduction Amortization RTU Asset | ||||||||||||
| (3) | 5 | U | 0832CY | XXX | 644 | CY | 99999 | Blank | $ XXX.XX | XXXX | 03XX | |
| FT05, 15 Reverse Historical Cost of RTU Asset | ||||||||||||
| (4) | 5 | U | 0832CY | XXX | 645 | CY | 99999 | Blank | $ XXX.XX | XXXX | 03XX | |
| FT05, 15 Record Loss on Termination of RTU Asset | ||||||||||||
| (5) | 5 | U | 0832CY | XXX | 657 | CY | 99999 | 3834 | $ XXX.XX | R | XXXX | 9999 |
Lessors
A lessor must account for the partial or full lease termination by:
- Reducing or eliminating the carrying values of the lease receivable and the related deferred inflow of resources.
–AND– - Recognizing a gain or loss for the difference.
If the lease is terminated because of the lessee purchasing an underlying asset the lessor must:
- Derecognize the asset.
–AND– - Add gain or loss on sale to termination gain or loss.
Note: Refer to the Governmental Activity and Business Type Activity RTU Lease Termination working paper templates available in the Annual Financial Report Working Papers page (Leases/SBITA/PPP Working Papers section).