A unified guide to both standards—covering recognition, measurement, disclosure, and the practical impact on fixed asset management programs.
Managing Director, New York
Jarred specializes in regulatory compliance for fixed asset programs, having guided over 100 organizations through GASB 87 and ASC 842 implementations.
Senior Director, CDMX
Jimena brings deep expertise in IFRS 16 implementation for multinational organizations operating across Latin America, Europe, and the Middle East.
Lease accounting has fundamentally changed how organizations report fixed assets. Whether you’re a U.S. government entity subject to GASB 87 or a multinational corporation reporting under IFRS 16, the mandate is the same: leased assets must appear on the balance sheet. This article provides a side‑by‑side analysis of both standards and their practical impact on fixed asset management in 2026.
Before these standards, operating leases were off‑balance‑sheet —invisible to investors, auditors, and asset managers. Now, a right‑of‑use (ROU) asset and corresponding lease liability must be recognized for virtually every lease exceeding 12 months. For organizations with hundreds or thousands of leases, this creates a massive expansion of the fixed asset register.
| Element | GASB 87 | IFRS 16 |
|---|---|---|
| Applies To | U.S. state & local governments | Private‑sector entities (IFRS reporters) |
| Lessee Model | Single model (financing) | Single model (right‑of‑use) |
| Short‑Term Exemption | ≤12 months | ≤12 months |
| Low‑Value Exemption | No specific threshold | ~ $5,000 per asset |
| Discount Rate | Lessor’s rate or incremental borrowing rate | Rate implicit in lease or incremental borrowing rate |
| ROU Asset Measurement | Lease liability + prepayments – incentives | Lease liability + initial direct costs + prepayments – incentives + restoration costs |
| Subsequent Measurement | Straight‑line amortization | Straight‑line or revaluation model |
| Lessor Accounting | Deferred inflow model | Finance lease or operating lease classification |
| Reassessment Triggers | Change in lease term likelihood | Significant event or change in circumstances |
Both standards create significant new requirements for fixed asset management teams:
ROU assets must be tracked alongside owned assets in the fixed asset register. This includes lease terms, payment schedules, renewal options, and termination clauses—data that was previously managed separately by procurement or real‑estate teams.
ROU assets are amortized over the lease term (or useful life if shorter), requiring new depreciation schedules that must be maintained and updated when lease modifications occur.
Both standards require reassessment of lease terms when significant events occur—such as exercising a renewal option, modifying lease payments, or changing the use of the underlying asset. Each reassessment triggers recalculation of the ROU asset and lease liability.
Extensive note disclosures are required, including maturity analyses of lease liabilities, descriptions of leasing arrangements, and quantitative information about ROU assets by major class of underlying asset.
Consolidate all lease agreements into a single repository. Many organizations discover 20‑40% more leases than initially estimated when they conduct a comprehensive inventory across departments.
Ensure your lease accounting software feeds directly into your ERP/asset management system. Manual data transfers between systems create reconciliation nightmares and audit risk.
Include ROU assets in your regular physical verification program. Auditors increasingly expect physical confirmation that leased assets exist and are in use at reported locations.
Create clear workflows for handling lease modifications, renewals, and terminations. Each event requires recalculation and journal entries—delays create compliance gaps.
Lease accounting compliance isn’t just a finance responsibility. Procurement, real estate, IT, and operations teams all enter into lease agreements and must understand the reporting implications.
Service contracts often contain embedded leases (dedicated equipment, exclusive‑use space) that must be identified and separately accounted for.
Using an inappropriate discount rate can materially misstate both the ROU asset and lease liability. Document your rate methodology thoroughly.
Failing to update lease records for modifications, renewals, or early terminations creates growing discrepancies that compound over time.
Both standards require extensive note disclosures. Incomplete or boilerplate disclosures are a common audit finding.
GASB 87 applies to U.S. state and local governments and uses a single‑model approach where all leases are treated as financings. IFRS 16 applies to private‑sector entities reporting under International Financial Reporting Standards and also uses a single lessee model but includes different lessor accounting. Both require recognizing right‑of‑use assets and lease liabilities on the balance sheet.
Both standards exempt short‑term leases (12 months or less). GASB 87 also exempts leases of intangible assets, biological assets, and supply contracts. IFRS 16 exempts leases of low‑value assets (generally under $5,000) and provides specific guidance for subleases and sale‑and‑lease‑back transactions.
Lease accounting standards require organizations to track leased assets alongside owned assets on the balance sheet. This means fixed asset management systems must accommodate right‑of‑use assets, track lease terms and payments, calculate amortization, and support disclosure requirements —significantly expanding the scope of asset management programs.
CPCON’s regulatory compliance team has guided hundreds of organizations through GASB 87 and IFRS 16 implementation. We provide lease discovery, calculation support, system integration, and ongoing compliance monitoring.
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