Does your unit pay for leases of non-financial assets such as buildings, land, vehicles, or equipment? If so, keep the following points in mind:
- Leases have the following characteristics:
- The lease terms do not convey ownership rights
- The lease term, including renewal options, is greater than one year; and
- The total payments over the term of the lease agreement sum to a value greater than or equal to $5,000.
- Effective July 1, 2021, all state/local government agencies (including public universities) are required to implement a new lease accounting standard issued by the Governmental Accounting Standards Board (GASB), which requires lease payments to be broken out between principal and interest.
- University Accounting and Financial Reporting (UAFR) will send out an amortization schedule for each lease to the appropriate payment contact. The lease amortization schedule provides the principal and interest breakdown in conjunction with the appropriate account codes for use. Those who make accounting entries for lease payments are required to follow this new process.
- It is also essential that the proper expense account codes are utilized for these lease payments, to ensure proper separation of principal and interest payments. For further details on these various lease expense account codes, refer to the Account Code Search webpage. Also, refer to our recent lease account code announcement which touched on some of our recent account code updates and additions.
Contact
For further details, refer to the applicable subject matter experts within the Lease Accounting section of UAFR’s Who to Ask list.