The Federal Accounting Standards Boards (FASAB) issued a proposal on Money that would change lease accounting for federal government entities.
Proposed Statement of Federal Financial Accounting Standards (SFFAS), Leases: An Amendment of SFFAS-5, Accounting for Liabilities of the Federal Government, and SFFAS 6, Accounting for Property, Plant, and equipment, is designed to provide relevant and meaning full financial information for federal financial statement users.
The proposal would include a comprehensive set of lease accounting standards to recognize federal lease activities in the reporting entity’s general-purpose federal financial reports, as well as appropriate disclosures.
Under the proposed standard, federal lessees would recognize a lease liability and a leased asset at the beginning of the lease, unless it is an intragovernmental lease or a short-term lease. A federal lessor would recognize a lease receivable and a deferred value, except on an intragovernmental lease or a short-term lease.
An intragovernmental lease is a contract or agreement that conveys the right to use an asset for a period in exchange for consideration occurring within a consolidation entity or between two or more consolidation entities as defined under SFFAS 47, Reporting Entity.
Recognition, measurement, and disclosure requirements for intragovernmental leases also are contained in the proposal.
“The board is seeking to provide relevant and decision-useful information to federal financial statement users,” FASAB Chairman Scott Showalter said in a news release. “The board strongly considered the cost associated with the lease proposal. Those cost considerations are especially evident with the proposed accounting for short-term and intragovernmental leases. Additionally, we were able to address more implementation issues resulting from the current standards.”