[ACFR-contacts-news] GASB 87 - Initial entries to record a lease

[HAMILTON Robert W * DAS]

Hello ACFR Contacts,

As part of the implementation efforts of GASB 87 the SARS unit has been reviewing where agencies have been recording lease entries and two issues have arisen that I'd like to address with this email. Both issues pertain to the entries that are necessary at the commencement of a lease as shown in Exhibit C of the draft OAM on Leases, 15.60.30<https://www.oregon.gov/das/Financial/Acctng/Documents/15.60.30%20draft.pdf>

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  1.  Lease Payments occurring in GAAP Fund 0001 - I understand that most agencies that are making their lease payments out of GAAP Fund 0001 have found that they are unable to record Step 1 in that GAAP Fund because the appropriation does not allow for a revenue item. If this occurs, enter Steps 1 and 2 in GAAP Fund 8500 using T-Codes 908R and 909R as shown above. SARS will make an ACFR adjustment to record the revenue and expenditure in the ACFR General Fund. I conferred with SFMS and for any leases initiated in FY 2023 and beyond for which the lease payments are made in GAAP Fund 0001, please submit a request to SFMS to create a D23 Fund that rolls up to GAAP Fund 0054 and record Steps 1 and 2 in that D23 Fund. The draft OAM will be revised to provide greater clarity around this issue.



  1.  Steps 1 and 2 being recorded in GAAP Fund 8500 - The only time Steps 1 and 2 should occur in GAAP Fund 8500 is due to the scenario described above. If lease payments are being made from any fund other than GAAP Fund 0001, Steps 1 and 2 should be recorded in that GAAP Fund making the payments. Since the GAAP Fund that makes the lease payments can be a fund that follows the economic resources measurement focus (i.e., proprietary and fiduciary funds) or one that follows the current financial resources measurement focus (i.e., governmental fund), both steps have an "X" in the respective measurement focus column. However, paragraph 36 of GASB 87 states that governmental funds report the lease proceeds other financing source and the capital outlay expenditure in the year a lease is initiated. Therefore, agencies that makes payments on leases in a governmental fund need to record Steps 1 and 2 in that governmental fund, not GAAP Fund 8500.


If your agency has recorded Steps 1 and 2 in GAAP Fund 8500 but the lease payments are not recorded in GAAP Fund 0001, please correct the entries and remove them from GAAP Fund 8500 and record them in the GAAP Fund that is making the entry. If multiple GAAP Funds are making the payments, allocate the Step 1 and 2 entries in those respective GAAP Funds in a commensurate manner.

This is another area we will look to add more clarity about in the OAM.

I appreciate everyone's efforts implementing this important standard. If you have any questions, please consult your SARS analyst.

Thank you,

Rob

Robert W. Hamilton, CPA
Statewide Accounting and Reporting Services Manager
Chief Financial Office
Department of Administrative Services
Cell: (971) 719-3031
http://www.oregon.gov/DAS/financial/acctng<https://gcc02.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.oregon.gov%2FDAS%2Ffinancial%2Facctng&data=05%7C01%7CRobert.W.HAMILTON%40das.oregon.gov%7Cb26de4a4013e44254cfe08da6b2b6b25%7Caa3f6932fa7c47b4a0cea598cad161cf%7C0%7C0%7C637940131463811861%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=kZwTB6RerPC%2FoW6CbBASjM3vgi2HplkduG7cI8x0JcA%3D&reserved=0>

Data Classification: Level 1 - Published

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