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Department of Finance
Ohio University
79 S Court St
Lindley Hall N162
Athens, OH 45701
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Finance

Leases

GASB Statement No. 87 is effective for FY22 beginning 7/1/21.  Previous definitions relating to capital and operating leases no longer apply. Lease modifications may trigger changes to the accounting so continued communication between departments & general accounting will be important during the life of the lease.

Lease

  • A contract that conveys control of the right to use another entity’s nonfinancial asset as specified in the contract for a period of time in an exchange or exchange-like transaction.  
  • This definition excludes contracts for services except those contracts that contain both a lease component and a service component.
  • This applies to leases that OU pays as lessee and leases that OU receives money for as lessor.

Conveys control of the right to use (must meet both)

  • The right to obtain the present service capacity from use of the asset. 
  • The right to determine the nature and manner of use of the asset.

Nonfinancial asset

  • Examples of nonfinancial assets include buildings, land, vehicles, and equipment.

Exchange or exchange-like transaction

  • Each party is essentially giving up and receiving something in equal value. (making payments over time for the right to use the asset) 

Lease Term – Period of Time

  • The lease term is the period during which a lessee has a noncancelable right to use an asset. 
  • Periods for which both the lessee and the lessor have the option to terminate the lease without permission from the other party (or if both parties have to agree to extend) are cancelable periods and are excluded from the lease term.

Leases with discretely presented component units

  • These are treated in the same manner as any other lease under the provisions of GASB 87. 

Purchase Contract that transfers ownership

  • A contract that transfers ownership/title of the asset to the lessee by the end of the contract and does not contain a termination option should be reported as a purchase (lessee) or a sale (lessor) transaction regardless of whether it is labeled as a lease. 

Short-Term Leases

  • A short-term lease is a contract, that at commencement, has a maximum possible term under the lease contract of 12 months (or less) including any options to extend, regardless of their probability of being exercised. For a lease that is cancelable by lessee and lessor, such as a rolling month-to-month or a year-to-year lease, the maximum possible term is the noncancelable period.

Object Codes

  • The following object codes should now be used for recording lease expenses.  A short-term contract is 12 months or less and long term is over 12 months.  The term length is calculated for noncancelable periods and include options to extend.  The lease may contain an option to purchase.
    • 732110 – SHORT TERM RENTAL AND LEASE – EQUIPMENT AND VEHICLES
    • 732520 – SHORT TERM RENTAL AND LEASE – FACILITIES, LAND AND BUILDINGS
    • 732115 – LONG TERM RENTAL AND LEASE – EQUIPMENT AND VEHICLES
    • 732515 – LONG TERM RENTAL AND LEASE – FACILITIES, LAND AND BUILDINGS 
    • 732105 – VARIABLE USAGE LEASE EXPENSE
    • 732120 – LEASE – FINANCED PURCHASE. 
      • This includes a lease contract that transfers ownership of the underlying asset by the end of the contract and does not contain termination options.
  • The following object codes should now be used for recording lease receipts.  A short-term contract is 12 months or less and long term is over 12 months.  The term length is calculated for noncancelable periods and include options to extend.   The lease may contain an option to purchase.
    • 470410 – LONG TERM RENTAL LEASE BLDGS – COMMERCIAL
    • 470415 – SHORT TERM RENTAL LEASE BLDGS – COMMERCIAL
    • 470480 – LONG TERM LAND LEASE INCOME
    • 470485 – SHORT TERM LAND LEASE INCOME
    • 470490 – LONG TERM RENTAL LEASE CELL TOWER/ROOFTOP
    • 470495 – SHORT TERM RENTAL LEASE CELL TOWER/ROOFTOP
    • 470510 – SHORT TERM EQUIPMENT RENTALS
    • 470515 – LONG TERM EQUIPMENT RENTALS
    • 471415 – SHORT TERM RENTAL LEASE BLDGS – RESIDENTIAL
    • 471422 – LONG TERM RENTAL LEASE BLDGS – RESIDENTIAL
    • 470475 – PERCENTAGE OF SALES LEASE REVENUE

Contract Information

Email a copy of all new lease contracts, amended lease contracts, and any related information to finance@ohio.edu.

GAFR needs to be timely informed of any changes to the contract or lease such as the following.

  • A full or partial termination of the contract has occurred.
  • A change in the lease term or payment schedule
  • A change in the likelihood of a residual guarantee being paid.
  • A change in likelihood of purchase option being exercised.
  • A change in estimated amounts for payments
  • A change in interest rate the lessor charges the lessee.
  • Any resolved contingencies that change future variable payments to now be fixed
  • The lease asset has become impaired – the asset is damaged or cannot be used by the lessee or the lessee’s right to use the asset decreases.
  • Adding or removing an asset from the lease
  • A change in the cancellation options
  • The lessee or lessor elects to exercise an option even though it was previously determined that it was reasonably certain that the lessee or lessor would not exercise that option.
  • The lessee or lessor elects not to exercise an option even though it was previously determined that it was reasonably certain that the lessee or lessor would exercise that option.
  • An event specified in the contract that requires an extension or termination of the lease takes place.
  • It is reasonably certain that a fiscal funding clause will be exercised.