In recent years, both the FASB and GASB have developed new leasing standards. While both standard-setters wrote their standards at essentially the same time and place, they came to different conclusions in certain key areas. However, one key area where both the FASB and GASB are in alignment is that to have a lease you need CPE.
CPE you say, what type of madness is that. Well, FASB ASC 842, Leases, defines a lease as being a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. GASB No. 87, Leases, defines a lease as being a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. So, when you are looking at an agreement under either the new FASB or GASB model, remember the acronym CPE. If you have C (conveyance of control) P (for a period of time) E (in an exchange transaction) you generally have an agreement that meets the definition of a lease.
Don’t let the new FASB and GASB leasing models stress you out. Learn more about the new FASB leasing model and how it applies to not-for-profits by signing up for The Most Critical Challenges in Not-for-Profit Accounting Today (CNA4). To learn more about the new GASB leasing model sign up for The Most Critical Challenges in Governmental Accounting Today (CGA4).
Charlie Blanton, CPA is the Senior Director of Governmental and Nonprofit Content for Surgent CPE, where he authors Surgent’s government and not-for-profit CPE courses and is a frequent webinar instructor.