GASB Q&A: How to Apply Fund Accounting to GASB 87 - YouTube

[Emily] Sarah O'Sullivan can you discuss how leases  are handled in the fund financial statements?

[Sarah O'Sullivan] Sure so uh just thinking of fund accounting and  you know the GASB environment overall um this is  

what, you know GASB statement 34 spelled out, what  financial statement requirements, how it's supposed  

to be presented. In the government world as we've  all discussed before and know is three primary uh  

fund types. You've got your government funds, your  proprietary funds, and your fiduciary funds - are  

the primary ones, and you've got sub funds,  you know categories underneath each of those  

but what GASB prescribes and requires is for  your government funds to be using more of your - 

I want to think about what's currently over  the next year, what resources am I going to be  

using and so you use what's called the modified  accrual basis of accounting and the really big  

thing that kind of sticks out for that one  is, you're not going to find these long-term  

assets on those - and liabilities - on those specific  fund financials. When you think about your capital  

leases you already have, um prior to even  implementing 87: capital fixed assets, you  

know your long-term debt, those kind of things.   But when you are operating within a proprietary or  

fiduciary fund, you're using a full accrual basis  of accounting, and so you are going to look at  

those balance sheets for those specific funds, and  see fixed assets and capital leases and long-term  

debt, and so it's a different - you know it's a  different set of terminology; It's a different kind  

of way that you're going to be recording things.  uh..Which - which GL accounts is going to hit for  

each of those, um a different way that you kind of  look at it. Where it all kind of comes together is  

that when you are putting together your, you  know, your annual report, you're required to  

present government-wide financials on the full  federal basis so while later in your report you're  

going to have these individual government fund  financials that are on modified approval. You have  

to take those and convert them into full accrual  for your government-wide so that everything's  

comparable. You're looking at everything  you know on the same level playing field.  

And so that requires a process um - I know typically  at year-end it's being done for, for when you're  

actually preparing your financial statements of  what - what kind of conversion entries do I need to  

record to take what I recorded as modified accrual  and now make it look like full accrual like my  

proprietary and fiduciary funds look um and so  really you know when you're thinking about   

GASB 87 and adopting it, you've - you're already doing  this type of work. It's not like it's going to  

be anything different from what your overall  process is for your capital leases currently.  

What you have to do to convert your fixed assets  to get those on the books from modified to  

full accrual, as well as your bonds, your debt, your  long - you know your long-term liabilities. What's  

going to happen now is you're obviously bringing  and making that lease population a lot larger  

because all your operating leases, previously  operating, are now all finance leases and so now  

you're going to want to think through your process  of I've got to capture that entire population now - 

make sure that it's complete and so you want to be  able to know that you're - you know, separating them  

into the correct funds, so that you're accounting  for them properly, and you get all your conversion  

uh process correct when you're ready to put  together your government-wide financials.  

[Emily] So before that polling question launched, I saw a  lot of heads nodding on the panel. So does anybody  

have anything to add on the fund accounting side? [Sarah Slaughter] Yeah and it'd be one thing to add is...um...  

One thing we haven't really touched much on  is on the lessor side. So just as a reminder  

you will be recording any lessor type leases  in the individual fund statement versus the  

leasee would be in the government-wide, so -   and these are one leases don't forget about  

whenever you're looking at completeness. Make  sure and ask - are there any, um you know like  

parking lots or things that you're leasing out  to organizations that would qualify as a lessor.

[Emily] um and I guess the final question that we'll  have time to take today "Do we have to apply  

GASB 87 at the fund accounting level or at  the government-wide financial statement level?"  

[Sarah Slaughter] So, as we kind of stated earlier, you're going to  do - if you're the leasee you would do it at

the government-wide level, but if you're doing  any lessor, it would be at the fund level, so  

setting up that lessor - that lease receivable,  and the lease payable at each individual fund.  

So which can - if you have a lot of those, you have  to consider the different fund materialities.

If you have more than one fund that um has these  types of leases...um otherwise the, the leasee, if  

you're a leasee leasing an asset, that would just be  at the government-wide level and then looking at  

the government-wide statement kind of materiality,  so those are the kind of different nuances on that.