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.
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.