Why is the lease start date important to municipalities?
Regarding accounting, a lessee should begin recording a right-to-use asset and a corresponding liability for lease payments on the lease start date — regardless of whether that date is the same as the lease commencement date or first payment date.
For the purposes of implementing GASB 87, the Lease Start Date is not always the same as stated in the contract. If the Lease Start Date is prior to your restatement date (ex. 7/1/2021 for a 6/30 FYE client), then your lease start date will be 7/1/2021. Since all existing leases are being restated with GASB 87, a lease cannot have a start date prior to your restatement date.
Closely reading the lease agreement is vital. Using the wrong date can create accounting errors requiring significant time to fix.
What’s important here?
Every lease contains several important dates, including the lease commencement date, first payment date, and lease start date. Each of these dates can be different, but in many cases, some fall on the same date.
All of these dates are important for lessees and lessors to know, but the lease start date is needed for accounting purposes.
