Work to adopt the mandatory Governmental Accounting Standards Board (GASB) lease accounting standard (GASB 87) has not begun for half of those employed in state and local governments (51.4%) and public higher education institutions (50%), per a Deloitte poll of professionals working at organizations subject to GASB standards. GASB 87 is effective for fiscal years beginning on or after Dec. 15, 2019.
Possibly because few entities have begun lease accounting work or because the organizations manage large numbers of leased assets, 45.9% of state and local government and 49.5% of public higher education institution professionals expect to spend more time and effort on lease accounting implementation — or preparation work to achieve compliance — in the year ahead.
“It’s great to see so many entities ramping-up work in coming months to comply with the GASB lease accounting standard. Compliance with this mandatory accounting rule demands a lot of cross-functional teaming within organizations, as they collect and analyze hundreds — or possibly thousands — of leases for equipment, real estate, IT services and more for financial reporting purposes,” said Jennifer Ahn, Deloitte Risk & Financial Advisory partner, Deloitte & Touche. “We strongly advise state and local governments, as well as public colleges and universities subject to GASB 87, to get started immediately if they haven’t already.”
When asked about the largest lease accounting implementation challenge, they would face in the year ahead, polled professionals pointed to a lack of resources or bandwidth to take on related work (28.6% state and local government; 36.2% public higher education institution).
Blake Rodgers, Audit & Assurance partner, Deloitte & Touche, added, “Because of the diversity in the volume and complexity of lease portfolios, adoption plans for the lease accounting standard vary between entities subject to GASB standards. Some may still be waiting to start lease accounting work. Others may have built cross-functional teams of professionals in accounting, finance, operations, legal and IT working actively and efficiently to manage the effort. As with most large organizational changes, preparation and strong collaboration are integral for successful lease accounting adoption and for managing any unexpected challenges that may arise during implementation. There’s no time to delay.”
Early questions leaders can ask to assess how far along their organization’s lease accounting efforts are include:
On Nov. 15, 2019, a Deloitte Dbriefs webcast, titled “Preparing for new lease accounting standards: What to know in advance,” and involving the Deloitte Center for Controllership, polled more than 400 employees of state or local governments and public higher education institutions. Polled professionals self-identified as working at organizations subject to GASB standards about lease accounting implementation. Answer rates differed by question.
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