7425 - Lease Capitalization Threshold Adopted Policy

FINANCIAL MANAGEMENT

7425 - Capitalization Thresholds for Leases and Subscription-Based Information Technology  Arrangements (SBITA)

Policy 7425

In accordance with the Governmental Accounting Standards Board (GASB) Statements 87 and 96, the district will reflect operating and capital leases and Subscription-Based Information Technology Arrangements (SBITA)s as liabilities and assets on financial statements.

 

For the purpose of this policy and in accordance with the GASB Statements referenced above, the following definitions are used:

1.      A “lease” is a contract which conveys control of the right to use another entity’s nonfinancial asset for the time specified in the contract for an exchange or exchange-like transaction.

2.      A “subscription-based information technology arrangement” is a contract that conveys the right to use another entity’s software, alone or in combination with tangible capital assets, for the time specified in the contract for an exchange or exchange-like transaction. Software that is insignificant to the cost of the underlying asset is excluded.

Accordingly, the district establishes lease and SBITA capitalization thresholds to identify the financial significance of district leases and SBITAs for purposes of reporting on financial statements.

The lease capitalization threshold is three and a half million dollars ($3,500,000.00) and is based on approximately 1% of budgeted expenditures. The lease capitalization threshold applies to all capital and operating leases with a maximum possible term of more than one (1) year.

The SBITA capitalization threshold is three and a half million dollars ($3,500,000.00) and is based on approximately 1% of budgeted expenditures. The SBITA capitalization threshold applies to all SBITAs with a maximum possible term of more than one (1) year.

Leases of similar type and SBITAs of similar type will be aggregated together when evaluating if they meet or exceed the district thresholds. Leases or SBITAs of a maximum term of less than one (1) year that do not meet the capitalization threshold, either individually or in the aggregate for similar types, are deemed immaterial.

Legal References:

Governmental Accounting Standards Board (GASB) Statement No. 87,

Accounting for Leases

Governmental Accounting Standards Board (GASB) Statement No. 96,

Subscription-Based Information Technology Arrangements

OSPI and SAO Accounting Manual for Public School Districts in the State of Washington, Rev. 2023, Chapter 3

 

 Adoption Date:              August 13, 2024