DebtBook recently hosted a webinar with FEI (Financial Executives International) to unpack the GASB 87 standard and provide a clear action plan for compliance for organizations in local government, higher education, and healthcare. Kasey Harris, Head of Accounting Services at DebtBook and a former CPA specializing in auditing state and local governments, shared her insights and recommendations on how organizations can successfully implement GASB 87.
She addressed the following key action items:
- Creating your implementation roadmap
- Collecting and Organizing Leases
- Extracting the data
- Crafting the initial schedules
- Launching the internal review process
- Understanding the importance of journal entries
- Starting the external review process
- Preparing note disclosures
- Adhering to ongoing compliance
Throughout the webinar, Kasey asked the audience several poll questions to better understand trends and challenges around GASB 87 compliance.
The first question was about whether organizations were currently using a lease management software to help organize and manage their lease repository. Fifty-eight percent of those organizations on the webinar do not currently use lease management software, followed by 27% who indicated they are already using a solution, and another 15% who weren’t sure.
Kasey shared, “We have heard from a lot of DebtBook clients and other folks in the market who have a few leases and tried to implement GASB 87 on their own. They encountered a lot of issues. Considering a lease management software can help with a lot of the challenges of compliance, [even if your lease repository is small].”
Indeed, depending on the number of leases an organization has and the size of the team, it can take 12 weeks or longer for a small team to plan and prepare for GASB 87. Many organizations are also finding that under the new guidance, they have more leases than they originally anticipated.
The next question was focused on what organizations consider to be the biggest pain point they face when implementing GASB 87. Options included determining whether embedded leases are present, determining the incremental borrowing rate, and compiling lease contracts.
“The pain points selected for this question are the most frequent challenges we hear from clients prior to implementing DebtBook. We hear these challenges come up repeatedly.”
All three options (embedded leases, incremental borrowing rate, and complying leases) were selected by 40% of the organizations on the webinar.
“We commonly hear this answer [all of the above] when talking with clients during the implementation experience. Many folks feel overwhelmed by multiple facets of complying with GASB 87. That’s why DebtBook is designed to help alleviate these pain points and get organizations up and running quickly.”
Another 25% of respondents cited ‘determining if you have any embedded leases’ as their biggest challenge. Some contracts will not specify that they are leases but rather have characteristics within them that indicate the contract includes payments for the right-to-use an underlying capital asset (e.g. a building, vehicle, equipment, etc.). These types of leases are called embedded leases because they are included within nonlease contracts (e.g., service contracts) and involve control of the right to use another entity’s nonfinancial asset.
The consistent theme throughout our presentation was really a combination of organizations delaying implementation and underestimating how complete their information is. Even tasks such as locating leases and extracting key lease data will take much longer than anticipated. So don’t delay — the GASB 87 deadline will wait for no one. As you prepare for compliance, consider the time, team members, and resources involved. If this process sounds overwhelming, you may want to consider a lease management solution, which can automate time-consuming processes and eliminate manual data entry.
For additional resources and best practice guides around GASB 87, be sure to check out our GASB 87 Guide.
How DebtBook Can Help
DebtBook delivers a complete, powerful, easy-to-use, cloud-based debt and lease management software for government, higher education, and healthcare finance teams. We make GASB 87 implementation and ongoing compliance easy and straight-forward and produce results that you will be confident in. We’ve built the intuitive, affordable, and complete solution for government finance teams that’s designed by government finance teams.
Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, which means we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.
