Lease Administration Program

On July 1, 2021, GASB Statement No. 87, Leases (GASB 87), a new standard on lease accounting that establishes a single approach to accounting and reporting for real estate and equipment leases will become effective.

GASB 87 categorizes all leases as financing, which essentially eliminates the current distinction between operating and capital leases. Lessee required to recognize liability; lessor required to recognize asset. This new standard will require extensive qualitative and quantitative disclosures from the UCO, in collaboration with University Procurement Services and IP&O – Real Estate areas.

While the primary focus of the lease administration initiative is to establish compliance with GASB 87, we also will implement a new, universitywide lease management and accounting solution and enhanced processes.

REMINDERS

  • All new changes (including those anticipated/negotiated prior to a contract being executed) and ongoing changes in equipment and real estate lease terms must be disclosed to UPS for equipment and other assets and IP&O Real Estate for land, building, space, and or other real estate in writing to ensure ongoing compliance.
  • Departments must properly fund all lease purchase orders and approve all invoices in RU Marketplace in a timely manner. All check requests for rent payments must be submitted to Account Payable on time.
  • It is very important to discuss and for you to understand and assist the university in identifying embedded leases in order to ensure proper handling and application of GASB 87 accounting standards, if applicable. 
  • In simple terms, embedded leases are typically contained within business and service arrangements/contracts where there is a right use of a tangible asset from one party to another.  The challenge with identifying if you have an embedded lease is because the contract may not use the terms “lease” or “rent”.  Therefore, it is critical to identify and evaluate whether a right to control the use of an asset is created by the contract.
  • Below are the new natural account/expenditure values and requirements.  Please begin to use to these immediately for all new lease transactions.

Natural Account/ Expenditure Type Value

Value Description

Lease Type

Transaction Type – When you would use this value

For RU Marketplace

69700

Lease Expense Equipment

Equipment – Rutgers as the Lessee

To be used when a department is initiating a payment on leased equipment.

69710

Lease Expense Real Estate

Real Estate - Rutgers as the Lessee

To be used when a department is initiating a payment on a leased space

12876

Accounts Receivable Security Deposit Real Estate

Real Estate – Rutgers as the Lessee

Rutgers as a tenant will record an amount paid as a security deposit IF we are to receive an amount back at the end of the lease.

For RU Cash Receipt Transactions

42123

Cash Receipts Journals Real Estate

Real Estate - Rutgers as the Lessor

When a Rutgers department is the lessor and funds are received from external sources as lease payments, use this natural account to record the revenue.

20225

Accounts Payable Security Deposit Real Estate

Real Estate – Rutgers as the Lessor

Rutgers as a landlord will record a security deposit received as a liability IF we are required to payback a certain amount at the end of the lease.