Government Lease Classification
Related terms
Category
GASB 87/96
Under GASB 87, government lessees do not classify leases as operating or finance. All leases (except short-term) are treated the same way: recognized as a lease liability and an intangible right-to-use lease asset. This single-model approach is simpler than ASC 842's dual classification but differs fundamentally from private-sector lease accounting.
Why it matters
The single-model approach eliminates the classification judgment that creates complexity under ASC 842 and IFRS 16. However, government entities face unique challenges: fiscal funding clauses, appropriation-dependent terms, and multi-year arrangements that cross budget cycles. The recognition pattern (straight-line amortization of the lease asset and interest on the liability) mirrors ASC 842 finance leases, not operating leases.
Lease accounting platforms that support GASB apply the governmental classification criteria automatically, distinguishing between short-term leases and those requiring full recognition.
How Arvexi handles this
Arvexi applies GASB 87's single-model approach automatically for government entities. The platform recognizes all qualifying leases with a right-to-use asset and lease liability, generates the straight-line amortization schedule, and handles the unique aspects of government leasing, including fiscal funding clause analysis and appropriation-dependent term determination.
Explore how Arvexi automates this: Lease Accounting