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GASB 87 Lease CalculatorLease Liability, Lease Asset and Amortization

What is this money worth, or what does it cost, over time?

Present value of lease payments, the lease asset, first-year interest and straight-line amortization for a government lessee, with the short-term lease test.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Lease liability at commencement
$267,400
Lease asset at commencement
$273,900
Total undiscounted payments
$300,000
Drawn to one scale
Lease liability at commencement$267,400
Lease asset at commencement$273,900
Total undiscounted payments$300,000
Interest expense, first year$9,782
Lease liability after the first year$222,182
Amortization expense per year (straight-line)$54,780
All results
MeasureResult
Lease liability at commencement$267,400
Lease asset at commencement$273,900
Total undiscounted payments$300,000
Interest expense, first year$9,782
Lease liability after the first year$222,182
Amortization expense per year (straight-line)
Over 5 years, the shorter of the lease term and useful life
$54,780
Lease term in months60.00
How this was worked out
Work shownrecomputed as you type
Lease liability = present value of payments due after commencement at the periodic rate (annual rate / payments per year)
Lease asset = lease liability + payments at or before commencement - incentives received + initial direct costs
Amortization = lease asset / shorter of lease term and useful life
Short-term lease: maximum possible term of 12 months or less, including options to extend

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Lease liability = present value of payments due after commencement at the periodic rate (annual rate / payments per year)
  • Lease asset = lease liability + payments at or before commencement - incentives received + initial direct costs
  • Amortization = lease asset / shorter of lease term and useful life
  • Short-term lease: maximum possible term of 12 months or less, including options to extend

How it works

GASB Statement 87 has a government lessee measure the lease liability at the present value of payments expected during the lease term (paragraph 21), discounted at the rate the lessor charges or, if that cannot be readily determined, the lessee's estimated incremental borrowing rate (paragraph 23). The lease asset is the liability plus payments made at or before commencement, less incentives received, plus initial direct costs needed to place the asset in service (paragraph 30).

The asset is amortized over the shorter of the lease term and the useful life of the underlying asset (paragraph 31); this tool uses straight-line. A lease with a maximum possible term of 12 months or less, including any options to extend regardless of probability, is short-term and is not capitalized (paragraph 16). Variable payments that depend on future performance or usage stay out of the liability; residual value guarantees and purchase options reasonably certain of exercise belong in the payment you enter.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Why is the first payment not in the liability when paid at commencement?

A payment made at commencement is settled on day one, so it is added to the lease asset under paragraph 30 instead of being discounted in the liability.

How is interest allocated to payments?

Paragraph 24 applies each payment first to accrued interest and then to the liability, which is how the first-year figures here are built.

What does a governmental fund report?

Paragraph 36: an expenditure and other financing source in the period the lease is first recognized, measured like the lease liability. Later payments follow the principles for debt service on long-term debt.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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