As you probably know, all government entities must now comply with GASB 87, the latest lease accounting standard issued by the Governmental Accounting Standards Board. The new standard affects state, local and municipal governments, along with many organizations in areas of the public sector such as higher education, healthcare and utilities.
The good news is that while GASB 87 requirements have already gone into effect, the reporting deadline for government and public sector entities pertains to the 2020 fiscal year.
The not-so-good news? The process for ensuring compliance with GASB 87 is a long and complex one — which means there is not a moment to waste between now and the end-of-the year deadline. To ensure success with this crucial deadline, organizations are advised to be compliant before their reporting deadline.
A sense of urgency about GASB 87 compliance
As we discussed in our recent blog on 4 things you need to know about GASB 87, many organizations are still largely unprepared for everything they need to do to meet the compliance requirements.
In fact, our research shows that 74% of organizations interested in a GASB 87 lease accounting software solution are only in the initial phases of planning. These organizations have a daunting task ahead of them, with challenges including:
- Understanding the full extent of their lease portfolios, often across many different departments and locations across the organization
- Determining what kinds of leases they have and whether those leases must appear on the balance sheet
- Identifying and collecting all the data points needed for lease calculations and footnotes disclosures — often, originating from different systems and in different formats
- Implementing the new required accounting methodology, such as the new rules for calculating lease liabilities/assets and receivables/deferments
In our research, we also found that more than half (59%) of organizations preparing for GASB 87 are focused on lease inventory — a critically important, yet preliminary step in achieving compliance. However, organizations must also consider the tremendous effort that is involved in preparation after they’ve identified all their leases. Any organizations who have not yet prioritized this crucial step must do so before it’s too late.
As our accounting partner Baker Tilly advises, now is the time to start planning for implementation. Whether you are just getting started — or already doing a lease inventory — you need to think about a software solution for managing the data, performing the necessary calculations, and generating reports according to GASB 87 standards.
That’s where lease accounting and management software can help you not only meet GASB 87 requirements, but also maintain compliance beyond the initial reporting period.
Know what to look for in GASB 87 compliant software
When evaluating lease accounting software, naturally you’ll want to look for a solution that specifically supports GASB 87, which requires all contracts that meet the definition of a lease to be recognized in financial statements and classified as a finance lease.
In addition, to ease the transition to GASB 87 and streamline the lease accounting process, you’ll want to look for a solution with the following capabilities and benefits.
Intuitive and easy to use
- Streamline lease data collection with other business applications, such as ERPs and accounts receivable
- Enable automated calculations and financial reports
- Support configurable data fields and reports to match your compliance requirements and organizational needs
- Centralize all your lease information within one system
Robust, best-in-breed functionality
- Incorporate years of lease financial management experience built within each feature and functionality
- Prioritize future-readiness with ongoing investments in R&D
- Focus on data security and privacy
Lease portfolio accuracy
- Provide data visualization for visibility into lease details and costs, enabling more informed business decisions
- Streamline lease detail management via system alerts for lease events and changes that could impact your ongoing financial reporting
Put your multitasking skills to work on GASB 87
With no time to spare, meeting the initial GASB 87 compliance deadline requires going to work immediately on gathering lease portfolio data — and at the same time, evaluating lease accounting software solutions so you can implement a solution as soon as possible.
To learn more about the requirements of GASB 87 and how your organization can better prepare for compliance, download our free white paper Get Ready for GASB 87 Lease Accounting.