40.60.30 Right-To-Use Lease Asset (Lessor)

At the lease inception, the lease receivable should be recorded at the present value of payments expected to be received during the lease term, including the following:

Fixed payments
Variable payments that depend on an index or a rate (such as the Consumer Price Index or a market rate), measured using the index or rate as of the commencement of the lease term
Variable payments that are fixed in substance
Residual value guarantee payments that are fixed in substance
Less any lease incentives payable to the lessee

The future lease payments are to be discounted using the interest rate the lessor charges the lessee. If the rate is not specifically stated, then the current interest rate the lessor would be charged at the inception of the lease to borrow the funds necessary to purchase the asset should be used.

Variable payments based on future performance of the lessee or usage of the underlying asset should not be included in the measurement of the lease receivable. Rather, those variable payments should be recognized as revenue in the period in which it was earned using revenue account 4120080.

The deferred inflow of resources is equal to the sum of the lease receivable, lease payments received from the lessee at or before the commencement of the lease term that relate to future periods (for example, the final month’s rent), less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term.

The deferred inflow on leases should equal the sum of the initial measurement of the lease receivable and any lease payments received from the lessee at or before the commencement of the lease term that relate to future periods (for example, the final month’s rent), less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term.

The following amortization schedule from DebtBook is the basis for the amounts in the following illustrative entries and instructions.

Individual Receivable Lease Amortization Schedule

Basic Entity Information

General Information

Field	Information
Fiscal Year-End	06/30
Beginning of Restatement Period	07/01/2021
GASB 87 Implementation Date	06/30/2022
Lease Name	Equipment
Lessee or Lessor	Lessor
Vendor Name / Lessee Name	Equipment

Key Dates

Field	Date
Lease Contract Date	06/15/2022
Contract Commencement Date	07/01/2022
Lease Start Date	07/01/2023
Lease End Date	06/30/2048
First Payment Date	07/01/2023
Second Payment Date	08/01/2023

Lease Term

Term	Months
Noncancelable Lease Term (in months)	60
Maximum Lease Term (in months)	300
Total Lease Term (in months)	300

Equipment Lease

Lease Receivable: 07/01/2023

Date	Beginning Balance	Fixed Receipts	Lease Receipt	Principal Receipt	Interest Income	Ending Balance	Short-Term Activity	Short-Term Balance	Total Receipt
06/30/2024	1,116,222.56	36,000.00	36,000.00	26,398.16	9,601.84	1,089,824.41	26,752.96	26,752.96	36,000.00
06/30/2025	1,089,824.41	36,990.00	36,990.00	26,752.96	10,237.04	1,063,071.45	1,276.92	28,029.88	36,990.00
06/30/2026	1,063,071.45	38,007.23	38,007.23	28,029.88	9,977.34	1,035,041.57	1,317.21	29,347.09	38,007.23
06/30/2027	1,035,041.57	39,052.42	39,052.42	29,347.09	9,705.33	1,005,694.48	1,358.65	30,705.74	39,052.42
06/30/2028	1,005,694.48	40,126.37	40,126.37	30,705.74	9,420.63	974,988.74	1,401.27	32,107.01	40,126.37
06/30/2029	974,988.74	41,229.84	41,229.84	32,107.01	9,122.83	942,881.73	1,445.12	33,552.13	41,229.84
06/30/2030	942,881.73	42,363.66	42,363.66	33,552.13	8,811.54	909,329.61	1,490.22	35,042.35	42,363.66
06/30/2031	909,329.61	43,528.66	43,528.66	35,042.35	8,486.31	874,287.26	1,536.62	36,578.97	43,528.66
06/30/2032	874,287.26	44,725.70	44,725.70	36,578.97	8,146.73	837,708.29	1,584.34	38,163.31	44,725.70
06/30/2033	837,708.29	45,955.66	45,955.66	38,163.31	7,792.34	799,544.98	1,633.43	39,796.74	45,955.66
06/30/2034	799,544.98	47,219.44	47,219.44	39,796.74	7,422.69	759,748.23	1,683.93	41,480.67	47,219.44
06/30/2035	759,748.23	48,517.97	48,517.97	41,480.67	7,037.30	718,267.56	1,735.85	43,216.52	48,517.97
06/30/2036	718,267.56	49,852.22	49,852.22	43,216.52	6,635.69	675,051.04	1,789.27	45,005.79	49,852.22
06/30/2037	675,051.04	51,223.15	51,223.15	45,005.79	6,217.36	630,045.25	1,844.21	46,850.00	51,223.15
06/30/2038	630,045.25	52,631.79	52,631.79	46,850.00	5,781.79	583,195.25	1,900.71	48,750.71	52,631.79
06/30/2039	583,195.25	54,079.16	54,079.16	48,750.71	5,328.45	534,444.53	1,958.83	50,709.54	54,079.16
06/30/2040	534,444.53	55,566.34	55,566.34	50,709.54	4,856.80	483,735.00	2,018.58	52,728.12	55,566.34
06/30/2041	483,735.00	57,094.41	57,094.41	52,728.12	4,366.29	431,006.87	2,080.06	54,808.18	57,094.41
06/30/2042	431,006.87	58,664.51	58,664.51	54,808.18	3,856.33	376,198.69	2,143.27	56,951.45	58,664.51
06/30/2043	376,198.69	60,277.78	60,277.78	56,951.45	3,326.34	319,247.25	2,208.27	59,159.72	60,277.78
06/30/2044	319,247.25	61,935.42	61,935.42	59,159.72	2,775.70	260,087.52	2,275.14	61,434.86	61,935.42
06/30/2045	260,087.52	63,638.65	63,638.65	61,434.86	2,203.79	198,652.67	2,343.88	63,778.74	63,638.65
06/30/2046	198,652.67	65,388.71	65,388.71	63,778.74	1,609.97	134,873.93	2,414.58	66,193.32	65,388.71
06/30/2047	134,873.93	67,186.90	67,186.90	66,193.32	993.58	68,680.61	2,487.29	68,680.61	67,186.90
06/30/2048	68,680.61	69,034.54	69,034.54	68,680.61	353.93	0.00	(68,680.61)	0.00	69,034.54
Total		1,270,290.53	1,270,290.53	1,116,222.57	154,067.94				1,270,290.53

Deferred Inflow of Resources

Date	Beginning Balance	Lease Revenue	Ending Balance
06/30/2024	1,116,222.56	44,648.90	1,071,573.66
06/30/2025	1,071,573.66	44,648.90	1,026,924.76
06/30/2026	1,026,924.76	44,648.90	982,275.86
06/30/2027	982,275.86	44,648.90	937,626.95
06/30/2028	937,626.95	44,648.90	892,978.05
06/30/2029	892,978.05	44,648.90	848,329.15
06/30/2030	848,329.15	44,648.90	803,680.25
06/30/2031	803,680.25	44,648.90	759,031.34
06/30/2032	759,031.34	44,648.90	714,382.44
06/30/2033	714,382.44	44,648.90	669,733.54
06/30/2034	669,733.54	44,648.90	625,084.64
06/30/2035	625,084.64	44,648.90	580,435.73
06/30/2036	580,435.73	44,648.90	535,786.83
06/30/2037	535,786.83	44,648.90	491,137.93
06/30/2038	491,137.93	44,648.90	446,489.03
06/30/2039	446,489.03	44,648.90	401,840.12
06/30/2040	401,840.12	44,648.90	357,191.22
06/30/2041	357,191.22	44,648.90	312,542.32
06/30/2042	312,542.32	44,648.90	267,893.42
06/30/2043	267,893.42	44,648.90	223,244.51
06/30/2044	223,244.51	44,648.90	178,595.61
06/30/2045	178,595.61	44,648.90	133,946.71
06/30/2046	133,946.71	44,648.90	89,297.81
06/30/2047	89,297.81	44,648.90	44,648.90
06/30/2048	44,648.90	44,648.90	0.00
Total		1,116,222.50

40.60.30.1 Right-To-Use Lease Asset Accounting

At the commencement of the lease term, the lease is recorded in the appropriate fund as follows:

Account	Account Description	DR	CR
1010250	Lease Receivable – Short-Term	$ 26,398.16
1100040	Lease Receivable – Long-Term	$ 1,089,824.41
2200100	Deferred Inflows on Right-to-use Asset		1,116,222.57

Record revenue received each month as a credit to account 4030020 - Income from Property. At year end, reclassify revenue to principal and interest on leases.

Account	Account Description	DR	CR
4030020	Income from property	$ 36,000.00
1010250	Lease Receivable – Short-Term		26,398.16
4130060	Leased Property Interest Income		9,601.84

At year-end, reduce the deferred inflow on leases and recognize a portion of the revenue. Deferred revenues should be amortized over the lease term using the straight-line method.

Account	Account Description	DR	CR
2200100	Deferred Inflows on Right-to-use asset	$ 44,648.90
4130070	Income from leased property		$ 44,648.90

At year-end, reclassify as short term that portion of the receivable due within the next fiscal year. At fiscal year-end, the amount of short-term receivable should be the same as the next year’s principal payment on the lease contract’s amortization schedule.

Account	Account Description	DR	CR
1010250	Lease Receivable Short-Term	$ 26,752.96
1100040	Lease Receivable Long-Term		26,752.96

At year-end an allowance is calculated and recorded for estimated uncollectible lease receivable, if applicable. If collectability appears improved, the entry would be reversed.

Account	Account Description	DR	CR
2200100	Deferred Inflows on Right-to-use asset	$ xxx.xx
1010260 or 1100050	Allow-Uncollectible Lease Receivable Short-Term or Allow-Uncollectible Lease Receivable Long-Term		xxx.xx

If the lease contract has ended at the end of the lease term, no entry is required.

If the lease contract has ended early, remove the remaining balances.

40.60.20.2 Proprietary Funds (Lessee) << 40.60.30.1 >> 40.60.30.2 Governmental Funds (Lessor)

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