Leases, SBITAs, and PPPs
Effective for fiscal year 2022, the Governmental Accounting Standards Board (GASB) Statement No. 87, Leases, establishes a single model for lease accounting based on the principle that leases are financings of the right to use an asset. Lessees will recognize a lease liability and an intangible right-to-use asset, and lessors will recognize a lease receivable and a deferred inflow of resources. GASB 87 applies to leases of capital assets—including buildings, land, and equipment and leases where the agency is the lessee or the lessor. For more information on the GASB 87 implementation and how to prepare for the changes review the following:
Effective for fiscal year 2023, GASB Statement No. 96 establishes a definition for SBITAs and provides guidance on the accounting and financial reporting for such arrangements. The definition and requirements are very similar to those for GASB 87, Leases. At the commencement of the subscription term, a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability should be recognized. The commencement of the subscription term begins when the subscription asset is placed into service.
Effective for fiscal year 2023, GASB Statement 94 defines public-private and public-public partnerships arrangements (PPP) as well as service concession arrangements (SCA) and availability payment arrangements (APA). It provides specific criteria for meeting those definitions and the accounting and financial reporting requirements for both sides of the arrangements.
For purposes of this statement, a PPP is an arrangement in which a government contracts with another entity (operator) to provide public services by conveying control of the right to operate or use a capital asset for a period of time in an exchange or exchange-like transaction. An SCA is a specific type of PPP in which the operator is compensated by fees from third parties, but the government retains some control over the services to be provided, to whom they will be provided, and the rates to be charged. The government also is entitled to significant residual interest in the service utility of the capital asset at the end of the arrangement.
In an APA, the government procures a capital asset or service by compensating an operator for activities that may include designing, constructing, financing, maintaining, and operating a capital asset for a period of time in an exchange or exchange-like transaction. In contrast to a PPP, the compensation from the government is based entirely on the asset’s availability and not the actual performance of a public service.
Facilities Portfolio Management Tool
By April 30, 2022, agencies must record all leases within the scope of GASB 87 that exceed the capitalization threshold ($500,000 in total lease payments over the lease term) in the Facilities Portfolio Management Tool (FPMT). This is in addition to the requirement that has existed for several years to record all state-owned and leased facilities in FPMT regardless of whether they meet the capitalization policy, to comply with RCW 43.82.150. This Lease Data Matrix shows the accounting and FPMT data entry requirements for lease contracts.
Beginning in fiscal year 2023, subscription-based IT arrangements within the scope of GASB 96 that exceed the capitalization threshold ($1,000,000 in total payments over the subscription term) in FPMT. Review the SBITA (GASB 96) Overview and Checklist to Implement for more details.
- Right-to-Use Asset Policies and Procedures
- Recording Lease Accounting Transactions (15 mins)
- Lease Disclosure Form (10 mins)
- Overview of Leases and the Facilities Portfolio Management Tool (PDF)
- Frequently Asked Questions (FAQs)
Is the contract a Lease, SBITA, or PPP?
- Contract Inventory Template and Contract Analysis Tool
- GASB_87 Decision Tree for Lessees
- GASB_87 Decision Tree for Lessors
- Lease Accounting Decision Tree (PDF)
Manually recording right-to-use lease accounting entries
- Lessee Worksheet for Manually Recorded Lease Accounting Entries (FPMT to AFRS)
- Lessor Worksheet for Manually Recorded Lease Accounting Entries (FPMT to AFRS)
Other OFM guides and resources
- Leases (GASB 87) Overview and Checklist to Implement
- Lease Payments Classification Chart
- SBITA (GASB 96) Overview and Checklist to Implement
- SBITA Stages and Implementation Costs – To capitalize or to expense?
- PPP Agency Guidance
GASB literature and resources
- GASB Statement No. 87, Leases
- GASB Implementation Guide No. 2019-3, Leases
- GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements
- GASB Statement No. 96, Subscription-Based Information Technology Arrangements
If you have questions or comments, please contact Anna Quichocho at firstname.lastname@example.org.