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Scope

This policy applies to all leases and software subscriptions for which the University has the right to use an asset used in operations (University is the lessee). In addition, it applies to all leases for which the University is the owner of an asset and leases the asset to parties outside of the University (University is the lessor).

Reason for Policy

The policy provides guidance as to the application of GASB for the University to ensure compliance with external reporting requirements for leases and software subscriptions.

Policy Statement

The Governmental Accounting Standards Board (GASB) issued Statement No. 87, Leases, and GASB 96, Subscription-Based Information Technology Arrangements, which establishes a single reporting model for lease and IT subscription accounting. GASB 87 changes the definition of a lease to eliminate the "capital" and "operating" differences.

All leases meeting the GASB criteria require lessees to recognize a lease liability and intangible Right-of-Use asset and lessors to recognize a lease receivable and a deferred inflow of resources.

Examples of nonfinancial assets include buildings, land, vehicles, and equipment.

All contracts that contain a lease of an asset or IT subscriptions should be reviewed and reported as a Right-to-Use (ROU) asset if it meets the criteria outlined in this policy. The University should consider the following when determining whether a contract that is reportable as a Right-of-Use asset:

• A contract is in place that contains the right to use the underlying asset as specified in the contract
• Contains a specified period of time
• The transaction is exchange or exchange-like, meaning both parties in the contract receive or give up equal value or something more than a nominal amount is exchanged.

The following thresholds should be considered when recording a lease of software subscription for GASB reporting as an asset and associated liability. 

• Land, buildings and equipment (excluding copiers and vehicles) are recorded regardless of the dollar value of the contract.
• Copiers and vehicles contracts of a total value (including optional renewals) of $50,000 or more are considered reportable as a lease.
• IT software subscriptions contracts of a total value (including optional renewals) of $500,000 or more are considered reportable as a software subscription.

Right-of-Use in a contract does not have to include 100% access to the asset to qualify as a GASB reportable lease. A Right-of-Use lease also includes use for portions of time, such as certain days of the week or hours as outlined in the contract.

A contract may contain multiple components. Some of which may meet the definition of the lease along with some that may not. All contracts should be examined to determine if a lease is embedded i