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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

Notes & Samples

NOTE 8 – Leases/SBITAs
Lessors

General Disclosure

According to GASB 87, paragraph 57, the lessor must disclose the following about its lease activities (which may be grouped for purposes of disclosure), other than short-term leases and certain regulated leases:

  • A general description of its leasing arrangements that includes the basis, terms, and conditions on which variable payments that are not included in the measurement of the lease receivable are determined (for example, leasing arrangements based on the future performance of the lessee or usage of the underlying asset, which are not included in the lease receivable).
  • The total amount of inflows of resources (for example, lease revenue, interest revenue and any other lease-related inflows) recognized in the reporting period from leases.
    • Add prepayments received from the lessee.
    • Subtract any lease incentives paid to the lessee at or before lease commencement from the lease receivable calculation.
  • The amount of inflows of resources recognized in the reporting period for variable and other payments not previously included in the measurement of the lease receivable (including inflows of resources related to residual value guarantees and termination penalties).
  • The existence, terms and conditions of options by the lessee to terminate the lease or abate payments if the lessor agency has issued debt for which the principal and interest payments are secured by the lease payments.
  • If a lessor’s principal ongoing operations consist of leasing assets to other agencies, present maturity analysis of lease receivable balances summarized by the major classifications of the underlying assets (buildings, equipment, vehicles, etc.) for:
    • Payments for each of the first five years
    • Payments in five-year increments thereafter
    • Display principal and interest separately

Note: Agencies are required to submit changes in leases through the LNSS web application.

Other Disclosures

See Leases — Special Transactions.

Subleases

According to GASB 87, paragraph 81, the original Lessee (now the lessor in the sublease) must disclose the:

  • Sublease in the disclosure of the general description of lease arrangements.
  • Lessor transactions related to subleases disclosed separately from the lessee transactions related to original leases.

Sale Leaseback

According to GASB 87, paragraph 82-86:

  • A qualifying sale is required as defined by GASB 62, paragraphs 287-319 and 321-323 (otherwise it is a borrowing). Disclose the sale in Note 2 and in the CANSS web application.
  • The sale and subsequent lease are accounted for and disclosed as two separate transactions (except for: any gain or loss on sale portion deferred and recognized over term of leaseback) but are immediately recognized if the leaseback is short-term lease.
  • If terms are significantly off-market, report based on the substance of the transaction, not as a sale leaseback (for example: borrowing, nonexchange transaction or advance lease payment).
  • Disclose a leaseback using general disclosure guidance.

Lease Leaseback

According to GASB 87, paragraph 87, lease and leaseback:

  • Are accounted as a net transaction (not accounted for separately) because there are only 2 parties involved.
  • Both parties must disclose (separately) the gross amount of the lease and leaseback in each of their financial statements.

Lease of Assets that are Investments

According to GASB 87, paragraph 41, if the underlying asset is reported at fair value, the lessor must not apply the recognition and measurement provisions of GASB 87.

According to GASB 87, paragraph 57d, if the lessor agency has issued debt for which the principal and interest payments are secured by the lease payments, the lessor must disclose the existence, terms and conditions of options by the lessee to terminate the lease or abate payments.