Question

Does your government report capital leases payable in the government- wide Statement of Net Position? If so, can you determine if new capital leases were initiated during the year? Can you trace the payments related to capital leases?

Answer 1

Yes, in the government wide statement of net position Capital lease payable is always reported.

The statement of net position reports the following elements of financial statements:

• Assets
• Deferred outflows of resources
• Liabilities
• Deferred inflows of resources
• Net position
  In liabilities we can trace the payments which are yet to paid for capital lease.

Capital Lease-

Many agencies make capital purchases on a capital lease plan. Essentially, the agency makes installment payments with an interest cost associated with the payments. After the final payment, the asset belongs to the agency.

Capitalize a lease if any one of the following criteria is a characteristic of the lease transaction:

• The lease transfers ownership of the property to the lessee by the end of the lease term.
• The lease contains a bargain purchase option.
• The lease term equals 75 percent or more of the estimated economic life of the leased property.
• The present value of the minimum lease payments at the inception of the lease, excluding executory costs, equals at least 90 percent of the fair value of the leased property.