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GASB 87 implementation: Lessons learned from early adopters

March 8, 2022 Article 2 min read
Keith Szymanski Amanda Gentner

It’s been a long road, but the time has come to implement GASB 87, Leases. Some entities have completed their work and others have implemented the standard early. Here are the key takeaways to help plan your implementation effort.

Elderly business professional wearing glasses while sitting at their desk using a laptop computer.The Governmental Accounting Standards Board (GASB) issued its GASB 87 standard on leases in June of 2017. Following an 18-month delay due to the COVID-19 pandemic, the time has come for implementation with June 30, 2022 year-ends being the first required to adopt the new standard. Some entities have completed the necessary work for implementation, and we’re aware of several that have implemented the standard early. Here are some key lessons learned from those on the cutting edge of this implementation.

Start preparing now

We’ve said it before, and we’ll say it again — the sooner you begin your preparation efforts, the better. Entities are facing unexpected speed bumps in the process, starting with the fact that staff are busy and carving out time for GASB 87 is difficult. Once preparations begin, entities are encountering difficulties and delays in locating information. Some are discovering that potential lease agreements can be decades old and perhaps not stored in a central repository, and others are locating original agreements but struggling to find amendments or extensions. To complicate matters further, sometimes the name of a party to the lease has changed or an individual involved in the agreement is no longer employed at the governmental entity.

Entities are facing unexpected speed bumps in the process, starting with the fact that staff are busy and carving out time for GASB 87 is difficult.

Plan the necessary time and resources to identify and analyze agreements

GASB 87 can apply to more agreements than those simply called a “lease.” Entities must consider all agreements that involve the use of assets. Figuring out what documents need to be analyzed may require searching through records, getting assistance from other departments (including legal and procurement), and may require a painstaking analysis of general ledger details. Once a complete population of agreements that may meet the definition of a lease has been identified — and the necessary underlying documents gathered — there’s significant analysis work to be done. Agreements can be long and packed with legal clauses, but nevertheless must be thoroughly reviewed to identify all relevant terms for GASB 87 purposes. Assumptions may have to be made about the likelihood of options being exercised and the appropriate discount rate. And if it’s determined that a lease must now be recorded in accordance with GASB 87, calculating the necessary adjustment can also be time-consuming.

What’s the key takeaway? Start the process now.

Tips for success

While all this may sound daunting, here are three tips to help you be successful:

  • Assemble a large, multidisciplinary team and adopt a clear process to work together to complete the tasks described above.
  • Familiarize the team with the necessary guidance — not just GASB 87 itself — but the related GASB implementation guides and perhaps some trainings and articles as well.
  • Adopt the proper tools to assist your organization. This could include an Excel work aid you develop internally or perhaps software designed for this purpose.

If you have questions or need help with your GASB 87 implementation, don’t hesitate to reach out — we’re here to help.

Read this next: GASB 87, Leases: Your implementation questions answered

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