Lease Liability

ID Status Date Public/Private Industry AHACPA Contact
#17581 Closed public Multifamily Les Sparks
Customer Reply

We have a non-profit client that has a long term lease for the land on which the housing project was built.  The lease does not require payments as long as the project is in compliance with its HUD Regulatory Agreement.

Based on the definition of a lease liability in the accounting standards, it this possible to calculate if their are no cash payments required?

Les Sparks

Okay Scott, I have looked more deeply at this. It appears that for a lease to qualify under 842, there must be consideration. If there is no consideration, there is no lease. GASB did attempt to force the imputed value, but it was later done away with. YEAH!

 

Since, the client in this case is a NFP, I think we would be forced to account for the land lease as a contribution under ASC 958-605. In other words, it would be a contribution. The “lease” aspect would just simply be a footnote disclosure. But the real transaction would be a contribution.

 

Les Sparks
AHACPA | 459 N 300 W #10 | Kaysville, UT 84037 | Phone: 801-547-0809
Support Center  | Send a Secure File | AHACPA Newsletter | Twitter

 

From: AHACPA Support <support@ahacpa.org>
Sent: Tuesday, November 22, 2022 5:02 PM
To: les@ahacpa.org
Subject: Lease Liability

Les Sparks

Scott, the major issue that is at stake fairly important to many NFPs. The issue you raise is an important one. There are many projects (202s & 811s) that have leases on land for which there are no payments. But are covered by Use Agreements (LURAs).

 

This conversation is hard to get a straight answer on easily. There is language that implies that the lease should be recorded at the fair value, if possible. Then when no payments are involved, the client would recognize a contribution for the lease payments it is not required to make.

 

How is that for fun…?

 

I am still trying to talk to people about this. However, it is a little unclear. Most of our CPAs (such as CohnReznick) indicate that most projects have payments. But that does not address the NFPs, many form PHAs.

 

We are still doing the research, so stay tuned…

 

Les Sparks
AHACPA | 459 N 300 W #10 | Kaysville, UT 84037 | Phone: 801-547-0809
Support Center  | Send a Secure File | AHACPA Newsletter | Twitter

 

From: AHACPA Support <support@ahacpa.org>
Sent: Tuesday, November 22, 2022 5:02 PM
To: les@ahacpa.org
Subject: Lease Liability

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