March 2023 LeaseQuery GASB Summit: Key Insights
On March 23, LeaseQuery hosted another virtual GASB Summit, during which accounting experts explored the new GASB lease accounting standards, GASB 87 and GASB 96. Over 840 attendees of the free CPE event heard speakers from LeaseQuery, Cherry Bekaert, MGO, Horne, Eide Bailly, and Crowe discuss Day 2 lease accounting under GASB 87 including lessons learned, observations regarding government entities implementing the new standard, and tips to remember for maintaining compliance post-transition.
ICYMI: GASB Summit Highlights
Accounting professionals at the summit discussed details of GASB 87 and GASB 96, as well as the best practices for implementation and ongoing compliance. Below, we have listed some of the most important quotes from the event. For more details, check out the recap below.
Danny Martinez – Government and Public Sector – Accounting Advisory Lead at Cherry Bekaert
“In terms of factors that usually correlate to a successful implementation, there are two things. First, on the resource side, the local government themselves took the time to dedicate resources either internally or with an advisory firm. Secondly, meeting with the departments where they had that lease exposure. Sitting down, in a room, for 30 minutes and saying, ‘this is what we’re looking for, do you have any of these?’ That flow of communication usually led to a successful implementation.”
“In terms of challenges or surprises, I’ll give you 3 things. First, they were reading these lease agreements and then would say ‘oh, what did I agree to? I had no clue I signed up for this thing for 20 years.’…Two, the presentation, especially on the government fund/financial side, was surprising. Having to put that other financing source and lease expense on the books, and putting that interest revenue was a little bit surprising for some governments. Lastly, for those governments that didn’t have debt, trying to come up with an incremental borrowing rate was also a surprise and a shock to them.”
Violet Urdiales, CPA – Consulting Manager, Crowe
“From our experience, this is usually the most time-consuming part of the process. Under GASB 96, identify all of the implementation costs and bucket them into three categories. The ones that go into the initial implementation stage need to be isolated and eventually applied to your right-of-use asset for your SBITAs.”
“Look for recurring patterns. So, the most common payment structures under GASB 96 are annual payments. With that being said, that doesn’t mean that you won’t have any monthly payments or quarterly payments. Typically, look for those recurring payments and those patterns, anything that says IT, subscriptions payments, software, and keywords like that. Then make sure you have a contract connected to that payment and that those contracts have been reviewed.”
Jaron Moss, CPA – Accounting Manager, LeaseQuery
“Do you have the right to benefit from the software, log in, and use it as specified in the contract? That’s the first criteria that must be met. The second is the nature and manner of use of the underlying IT asset as specified in the contract. What determines if you have the right to control the nature and manner of use? So essentially, do you have the right to log in when you want to, use the software as you need, and there’s some confusion around this because the software creators ultimately have control over the software? But, they are giving you control as specified in the contract to use it to benefit your organization as needed…that essentially meets the definition of what it means to convey control for a GASB 96 agreement.”
“The next section in the contract specifies that it can be a loan, like software, or it can also include a tangible IT asset as well. If the agreement gives you the right to use software by itself, then that’s definitely, if it’s a SBITA under GASB 96. If it’s a tangible IT asset only, like a server and there isn’t a software component, then you can account for that under GASB 87.”
Attendees of the GASB summit received an overview of GASB 96 and what the standard entails, tips for Day 2 lease accounting under GASB 87, and examined the key concepts for Subscription-Based IT Arrangements (SBITAs). LeaseQuery is here to provide support as organizations undergo the transition to the new standards. Watch the Summit recap for more information and download our Ultimate GASB 96 Guide to help ease your transition.