GASB 87 Lessor Journal Entries: A Guide for Dummies

Are you struggling to wrap your head around the complexities of GASB 87 for lessors? Don’t worry; you’re not alone! With the effective date of GASB 87 fast approaching, it’s essential to understand how it will affect your organization’s finances. In this blog post, we’ll break down the accounting entries for a lessor under GASB 87, the implementation guide, and the disclosure requirements.

If you’re wondering whether GASB 87 applies to lessors, we’ve got you covered. We’ll also provide clear and concise explanations for gasb 87 financed purchasing and gasb 87 restatement examples.

Moreover, we’ll delve into the lessee journal entries necessary to comprehend the whole picture. We’ll go through the gasb 87 lessor accounting examples necessary to help you understand the concept better.

For lessors, the crucial question is, how should you account for an operating lease? That’s what we’ll answer in this informative blog post. We’ll explain the best way to make the necessary accounting treatment.

With this comprehensive guide on gasb 87 lessor journal entries, you’ll be able to navigate the new accounting standard with ease. Let’s dive in!

Understanding GASB 87 Lessor Journal Entries

The GASB 87 is a new lease accounting standard issued by the Governmental Accounting Standards Board (GASB). The new standard applies to all state and local governmental entities that are lessors or lessees. In this section, we will discuss the lessor journal entries required by GASB 87.

Recognition of Lease Receivable and Revenue

Under GASB 87, lessors should recognize a lease receivable and revenue at the lease commencement date, which may differ from the lease payment due date. The recognition of lease receivable and revenue should be recorded in the lessor’s financial statements, and the amount should be based on the present value of the minimum lease payments due over the lease term.

Lease Income Recognition

Lease income should be recognized by the lessor at a constant rental rate over the lease term, unless another systematic and rational method is more appropriate. This means that the lease income recognized by the lessor should be spread evenly over the life of the lease.

Lease Receivable and Revenue Amortization

After recognition, the lease receivable and revenue should be amortized over the life of the lease. The amortization amount should be based on the effective interest method, and the amortization should be recorded as interest revenue.

Lease Modifications

If a lease modification occurs, lessors should remeasure the lease receivable and revenue based on the modified terms. The remeasurement should be recorded as an adjustment to the lease receivable and revenue.

Disclosure Requirements

GASB 87 requires lessors to disclose detailed information about their leases in the financial statements. Information to be disclosed includes the types of leases and the terms and conditions of each lease.

In conclusion, lessor journal entries required by GASB 87 ensures clear and transparent financial statements. It encourages lessors to properly account for their lease income, which is beneficial for all stakeholders.

Gasb 87 for Dummies

If you’re not an accounting expert, the new GASB 87 guidelines can be a bit overwhelming. But don’t worry; we’ve got you covered. In this section, we’ll give you a simple, straightforward overview of what GASB 87 is all about.

Understanding GASB 87

GASB 87 is a set of rules created by the Governmental Accounting Standards Board (GASB). It outlines how leases should be reported in financial statements. The primary focus of GASB 87 is to make sure that leases are accurately reported, with adjustments made for any changes in lease terms or ownership.

Why is GASB 87 important

The main reason GASB 87 is important is that it provides more accurate financial reporting. Before the guidelines were created, leases were not always reported correctly, and this led to inconsistencies in financial reporting. GASB 87 aims to provide clarity and consistency in how leases are reported, thus creating a more accurate picture of the financial position of an organization.

What does GASB 87 mean for lessors

If you’re a lessor, then GASB 87 means that you’ll need to make some adjustments to your accounting practices. You’ll need to record a lease receivable and a deferred inflow of resources for all your leases. Moreover, you’ll need to keep track of lease modifications and changes in ownership, as these will impact the amortization of your lease receivables.

What does GASB 87 mean for lessees

For lessees, GASB 87 means that you’ll need to record a lease liability and a right-of-use asset on your balance sheet for all your leases. Moreover, you’ll need to recognize interest expense and amortization expense over the life of the lease. This is a significant change from the previous rules, which allowed lessees to keep operating leases off their balance sheets.

Wrapping up

In conclusion, GASB 87 is an important set of guidelines that affects both lessors and lessees. It’s essential to understand the basics of GASB 87 to comply with the guidelines and ensure accurate financial reporting. Hopefully, this brief overview has helped you understand what GASB 87 is all about and how it may impact your organization.

Gasb 87 Effective Date

If you’re a municipal accountant, you’re probably aware of the new accounting pronouncement, GASB 87, that covers lease accounting. The GASB-87 standard is the Governmental Accounting Standards Board’s latest accounting pronouncement, and it made significant changes to lease accounting. One key aspect of the new GASB 87 standard is the effective date.

What is the effective date

The effective date of GASB 87 is July 1, 2021. This means that all lessees and lessors will need to apply the new standard for fiscal years beginning after June 15, 2021. However, early adoption is permitted for entities with fiscal years beginning after December 15, 2019.

Why is the effective date important

The effective date is essential because it marks the beginning of when the new GASB 87 standard comes into force. This means that all lessees and lessors must be ready to adhere to the newly revised standard and adjust their lease agreements. Also, entities must understand the new accounting rules for GASB 87, including recognition, measurement, and disclosures.

What should you do to prepare

To prepare for the effective date, you need to assess the impact of the standard on your organization, both from a financial and operational standpoint. Additionally, you’ll need to evaluate your lease portfolios to identify any potential issues and take corrective action before the effective date.

It’s also essential to review your current accounting system and lease management processes to ensure that they are compatible with the new standard. Lastly, you will need to provide training for your staff so that they can effectively implement the changes required by the new GASB 87 standard.

In conclusion, the effective date of GASB 87 is quickly approaching. By being aware of the effective date and taking proactive steps to prepare for it, you’ll be in a better position to comply with the new accounting pronouncement and avoid any potential issues or penalties.

Gasb 87 Financed Purchase

One of the most significant changes brought by GASB 87 relates to the accounting treatment of financed purchases. Prior to GASB 87, leases were reported as either operating or capital leases. However, GASB 87 requires all leases to be reported on the balance sheet, including those that were previously classified as operating leases.

What Is a Financed Purchase

A financed purchase is a type of lease where the lessee takes ownership of the leased asset at the end of the lease term. The lease is effectively a loan to the lessee, with the payments made over the lease term representing both interest and principal.

Changes under GASB 87

Under GASB 87, all finance leases are treated as purchases by the lessee. As a result, the lessee should record the lease as an asset and a liability on the balance sheet. The asset should be amortized over its useful life, and the liability should be reduced as payments are made.

From a lessor’s point of view, the accounting treatment for financed purchases will remain largely unchanged. The lessor will continue to record the lease as a receivable, with income recognized over the lease term.

Impact on Financial Statements

The new accounting treatment of financed purchases under GASB 87 will have a significant impact on the lessee’s financial statements. By recording the lease as an asset and a liability, the lessee’s debt-to-equity ratio is likely to increase. Additionally, there may be an impact on key financial ratios such as the return on investment and the interest coverage ratio.

However, there are also benefits to the new accounting treatment, as it provides a more accurate representation of the lessee’s financial position. By recording all leases on the balance sheet, stakeholders can get a clearer understanding of the lessee’s financial obligations and assets.

GASB 87 brings significant changes to the accounting treatment of finance leases. Lessees must now record all leases, including financed purchases, as assets and liabilities on the balance sheet. While this may lead to some short-term challenges, the new accounting treatment ultimately provides a more accurate representation of the lessee’s financial position.

Gasb 87 Restatement Example

One of the main requirements of GASB 87 is that the lessor must record a lease receivable and a deferred inflow of resources at the commencement of a lease. The deferred inflow of resources should be amortized into income over the term of the lease. However, there are cases where the accounting treatment of leases must be restated. Let’s take a closer look at how to perform a GASB 87 restatement with a real-life example.

Restatement Process Overview

Restating a lease means recording a new lease liability and right-of-use asset. This process is necessary when there is a change in lease terms or when lease payments are restructured. The restatement process involves adjusting the opening balance sheet values, adjusting the amortization schedules and adjusting the expense and liability values on subsequent financial statements.


Let’s assume that a government leased a building under an operating lease agreement on January 1, 2020. The agreement had a lease term of five years with an annual lease payment of $100,000. On January 1, 2022, the government negotiated a lease modification that would increase the annual payment to $125,000 for the remaining three years of the lease term.

To record this modification, the government should first remeasure the lease liability and modify the right-of-use asset. The lease liability will increase by the difference between the present value of the remaining lease payments under the original agreement and the present value of the remaining lease payments under the modified agreement. The right-of-use asset will increase by the same amount as the lease liability.

After determining the new values of the lease liability and right-of-use asset, the government should adjust its amortization schedule for both of these financial statement items.

Restating a lease requires significant effort and attention to detail. However, performing one correctly is critical in making sure your financial statements accurately reflect your organization’s financial position. By following the above example, you can make your restatement process less intimidating. Do not hesitate to consult with a certified public accountant (CPA) or a professional GASB consultant to help you out with the process.

Gasb 87 Implementation Guide

If you are a lessor and have a lease with a lessee, you may be affected by the GASB 87 accounting standards. The new standard requires you to recognize a lease liability and right-to-use asset in your financial statements for all leases with a term of more than one year. But don’t worry; you don’t need to worry about the technical aspects of implementation yourself. There are many resources and guides out there to help you make the transition to GASB 87.

Understanding the Implementation Guide

Before you begin, make sure you understand the implementation guide. The guide provides a comprehensive overview of the requirements of GASB 87 and the best practices for implementation. It includes detailed explanations, examples, and illustrations of the necessary journal entries. The implementation guide is available from the Governmental Accounting Standards Board’s website.

Consult with an Expert

Consulting with an expert is also a great way to ensure your implementation is smooth and efficient. Experts can help you identify your lease agreements and determine how to account for them under GASB 87. They can also provide advice on adjustments to your financial statements and your internal financial reporting procedures.

Creating an Implementation Plan

Creating an implementation plan is essential. This plan will help you stay on track and ensure that you meet all of the requirements of the new standard in time. Your implementation plan should include a timeline, training, and a communication strategy for stakeholders.

Train Your Staff

Your staff must be trained on the new standards. Your implementation will be ineffective if your staff does not understand how to apply the new requirements to your lease agreements. Training should include a review of the lease agreements and the new lease accounting requirements under GASB 87.

In conclusion, implementing GASB 87 may seem daunting. But with careful planning, consultation with an expert, and review of the implementation guide and training materials, you can transition smoothly to the new standard. Remember that following the GASB 87 implementation guide will help ensure accuracy and consistency in your financial reporting, ultimately leading to better decision-making for your organization.

Does GASB 87 Apply to Lessors

If you’re wondering whether GASB 87 applies to lessors, the short answer is no. GASB 87 is an accounting standard that focuses on the accounting treatment for leases by both lessees and lessors. However, the scope of the standard is limited to accounting for lease transactions by lessees and lessors who operate as lessees.

What is GASB 87

GASB 87 is a new accounting standard that replaces the previous standard, GASB 13, and brings about significant changes in accounting for leases. The new standard requires lessees and lessors to recognize and measure leased assets and liabilities on the balance sheet, which provides a more accurate portrayal of an organization’s financial position.

Who is a Lessor

A lessor is an entity that leases its property to another party, known as the lessee. Lessors can range from individuals who rent out their personal property to professional leasing companies that specialize in leasing real estate, equipment, and other assets.

Does GASB 87 Apply to Lessors

While GASB 87 applies to both lessees and lessors, the standard’s scope is limited to accounting for lease transactions by lessees and lessors who operate as lessees. This means that the accounting treatment prescribed by GASB 87 applies only to lessors who are considered to be operating leases.

However, lessors who manage their leases as sales-type or direct financing leases are generally not affected by GASB 87. These types of leases are accounted for differently under GASB 87, and the accounting treatment prescribed by the standard is not applicable to these types of leases.

In conclusion, GASB 87 does not apply to lessors; however, lessors are still responsible for complying with other accounting standards related to leases and lease transactions. It is important to consult with a CPA or other financial professional to ensure proper compliance with these standards.

Understanding Gasb 87 Lessee Journal Entries

With the implementation of GASB 87, many lessee organizations are struggling to keep up with the changes. Here, we’ll be discussing the basics of GASB 87 lessee journal entries to ensure you have a better understanding of what you need to do.

What are GASB 87 Lessee Journal Entries

GASB 87 lessee journal entries are the record-keeping of the transactions related to leases entered into by the lessee organization. The new standard requires the lessee to record and recognize the lease liability and right-of-use asset in its books. This means that every lease entered into must have an entry in the lessee’s books of accounts.

What are the Types of Lessee Journal Entries

Lessee Journal Entries can be classified into two categories:

Initial Entries

Initial entries are recorded at the beginning of the lease term and include the initial measurement of the lease liability and the right-of-use asset. In addition, the present value of lease payments is determined, including any incentives received, and initial direct costs are included in the right-of-use asset.

Subsequent Entries

Subsequent entries are made throughout the lease term, reflecting the reduction of the lease liability and the ongoing depreciation of the right-of-use asset. These entries are also used to record adjustments in the lease liability due to changes in the lease term or payments.

How to Record Lessee Journal Entries

To record lessee journal entries, the lessee must:

  1. Identify and classify the lease
  2. Determine the lease term
  3. Determine the lease payments
  4. Determine the discount rate
  5. Record initial journal entries
  6. Record subsequent journal entries

GASB 87 lessee journal entries are essential to ensuring compliance with the new accounting standard. Lessee organizations must ensure that they understand the basics of GASB 87 and are prepared to record the necessary journal entries accurately. With this basic guide, you should be well-equipped to handle any lessee journal entries that come your way.

Examples of GASB 87 Lessors Accounting

As we discussed earlier, GASB 87 is a new accounting standard for government lessors and lessees. In this subsection, we will focus on some examples of accounting for GASB 87 lessors.

Lease Payments

In GASB 87, lease payments are classified as either financing or operating. Financing lease payments include the principal and interest while operating lease payments include just the rent payments.

Initial Lease Payments

The initial lease payment for GASB 87 lessors includes any costs incurred by the lessor at or before the commencement date of the lease, such as legal expenses or broker commissions. These initial payments are not considered lease revenue.

Lease Receivable

GASB 87 lessors recognize a lease receivable in their financial statements. The lease receivable equals to the present value of lease payments receivable over the course of the lease term, discounted to the commencement date using the interest rate implicit in the lease.

Sale and Leaseback Transactions

In GASB 87, sale and leaseback transactions are treated as financing arrangements. A sale and leaseback transaction occurs when a lessor sells the right to use an asset to another party and simultaneously leases the same asset back to the original owner.

Amortization of Lease Receivables

Lease receivables are amortized over the lease term, using either the interest method or the straight-line method. The interest method is used when the lease payment is not constant, and the straight-line method is used when the lease payment is constant.

Sublease Revenue

In GASB 87, sublease revenue is recognized in the financial statements of the lessor. The amount of sublease revenue is equal to the monthly rental payments received from the subtenant.

GASB 87 has significant implications for both lessors and lessees. Lessors must follow new accounting standards for lease transactions, including new rules for classification, recognition, and measurement of lease transactions. By providing examples of accounting for GASB 87 lessors, we hope to improve your understanding of this important topic.

What Are the Accounting Entries for a Lessor

As a lessor, you’re responsible for overseeing the lease contract and the property you’re leasing out. That includes recording and updating accounting entries that reflect the value of the lease and the payments from the lessee. In this section, we’ll explore the basic accounting entries for a lessor.

Initial Recognition

When you sign a lease contract with a lessee, you need to record the lease in your books. Under GASB 87, you need to recognize a lease liability and a lease receivable at the beginning of the lease term. The lease liability represents the obligation to provide the leased asset to the lessee, while the lease receivable represents the amount you’re entitled to receive from the lessee.

Lease Payments

As the lessee makes lease payments, you need to record them in your books. Each lease payment consists of principal and interest components – the principal component reduces the outstanding lease receivable, while the interest component is recognized as interest income. You need to apply a constant interest rate to calculate the interest income for each lease payment.

Lease Income

The lease income is recognized monthly for operating leases and over the lease term for finance leases. The amount of lease income is calculated by allocating the total lease payments over the lease term and recognizing the income on a straight-line basis. For finance leases, you need to record an initial direct financing cost, which is amortized over the lease term.


The leased asset is recorded as a fixed asset and depreciated over its useful life. You need to record depreciation expense for the leased asset in your books, which reduces the value of the leased asset. The depreciation expense is recognized in your income statement, and the accumulated depreciation is recorded on your balance sheet.

In summary, the accounting entries for a lessor include recognizing the lease liability and lease receivable, recording lease payments, recognizing lease income, and depreciating the leased asset. By following these accounting entries, you can ensure proper financial reporting and compliance with GASB 87.

What Are GASB 87 Lessor Disclosure Requirements

GASB 87 is a set of accounting standards that applies to lessors, requiring them to disclose certain information in their financial statements. The purpose of these requirements is to provide transparency and clarity to the lessor’s financial reporting, making it easier for stakeholders to understand the company’s financial health, and the risks and rewards associated with leasing.

Disclosure Requirements for Lessor

The disclosure requirements outlined by GASB 87 for lessors include (but are not limited to):

  • Lease Revenue: A lessor must disclose revenue generated from leases on assets owned for the reporting period.
  • Lease Term: A lessor must disclose the term of the lease and any options available to renew or cancel the lease.
  • Lease Expenses: A lessor must disclose any expenses incurred in connection with leasing assets, such as property tax, depreciation, or interest on debt related to the leased asset.
  • Future Cash Flows: A lessor must disclose future cash flows from the lease.
  • Lease Type: A lessor must disclose the type of lease (operating lease or finance lease) and any additional information about the lease arrangement available.
  • Termination Provisions: A lessor must disclose any termination provisions in the lease agreement.
  • About the Lessors: A lessor must also disclose information about the nature of the business that leases its assets, including its size, history, and other pertinent information.

In summary, under GASB 87, lessors must make detailed disclosures in their financial statements about their leasing activities. These requirements aim to improve transparency for stakeholders and provide them with a clear understanding of a lessor’s financial status, helping them make informed business decisions. To ensure compliance, lessors should carefully review the disclosure requirements outlined by GASB 87 and follow them while preparing their financial statements.

How to Account for an Operating Lease as a Lessor

As a lessor, the accounting for an operating lease can be quite complex. In this section, we will discuss the appropriate accounting treatment for operating leases.

Account for Lease Revenue

Lease revenue is recognized on a straight-line basis over the lease term. This means that if the lease is for three years and the total revenue is $36,000, the lessor would recognize $1,000 per month.

Account for the Lease Liability

The lease liability is recognized as the present value of lease payments. The present value of lease payments is calculated using the lessee’s incremental borrowing rate.

Record Lease Receivable

When a lease agreement is signed, the lessor records a lease receivable on the balance sheet. The lease receivable is the present value of lease payments.

Record Depreciation Expense

The asset recorded by the lessor for an operating lease is depreciated over the term of the lease.

Record Lease Expense

The lease expense is recognized on a straight-line basis over the lease term. This means that if the lease is for three years and the total expense is $36,000, the lessor would expense $1,000 per month.

Accounting for an operating lease can be complex, but the key is to stick to the straight-line method. As a lessor, it is essential to account for all lease-related transactions correctly. By following these guidelines, lessors can ensure accurate financial reporting and maintain compliance with GASB 87.

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