PHA Ground Lease

ID Status Date Public/Private Industry AHACPA Contact
#14809 Closed public PHA Les Sparks
Customer Reply

Hello Les,
We are working on a development with a PHA that used a ground lease for a rehab project, and we were hoping to get your thoughts on the proper GAAP to apply for the lessee, and also on calculating the potential value of the lease.
The facts:
99 year lease
Interest accruing from commencement compounding at 4%
Payments due beginning Year 4 from available net cash flow
The total capitalized amount was allocated 75% to existing structures, and 25% to the land
Your input is always appreciated!

Les Sparks

Brock, sorry this is delayed.


I assume here that you are prepared to follow GASB 87. Your situation is a little different as there are actually payment under the lease. Most of these ground leases do not have any payments, so most of the RAD-type leases really have no impact under 87.


Here is the only summary I have for this as it is quite new and there are not many PHAs with lease payments.


  • PHA should recognize a lease receivable and a deferred inflow of resources at start of lease

  • PHA should NOT derecognize the leased asset

  • Receivable measured at net present value of expected lease payments

  • Deferred inflow measured at value of lease receivable, plus  any payments received at or before the start of lease term that relate to prior periods.

  • Revenue is recognized on the lease receivable from the deferred inflows in a systematic and rational manner over lease term

  • Notes should include a description of leasing arrangements and the total amount of inflows recognized from leases.




Les Sparks


(801) 547-0809


From: AHACPA Support <[email protected]>
Sent: Tuesday, February 9, 2021 5:04 PM
To: [email protected]
Subject: PHA Ground Lease

Customer Reply

Thank you very much, Les. That is very helpful as we are meeting with the state auditors in a few days.

On the lessee side we still feel we should use FASB. Since there is no transfer of ownership or bargain purchase, and with the land being valued at exactly 25%, it seems we’d need to record the land as an operating lease, and a capital lease for the building.

We’d like to then expense these over the life of the lease, but I am wondering if 30 or 40 years would be more appropriate.

Do these methods seem appropriate to you? Any other recommendations?

Kathy Christensen

I recently had to restore our website from a backup and I lost some support questions and answers.  If you have additional questions related to your question please email Les Sparks directly ([email protected]).  I am sorry for the inconvenience! ~ Kathy Christensen

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