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Commonwealth of Virginia Fiscal Fundamentals

Commonwealth of Virginia Fiscal Fundamentals. Lease Accounting. Department of Accounts. Lease Accounting . Lease information is an essential element of Virginia’s Comprehensive Annual Financial Report (CAFR).

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Commonwealth of Virginia Fiscal Fundamentals

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  1. Commonwealth of Virginia Fiscal Fundamentals Lease Accounting Department of Accounts

  2. Lease Accounting • Lease information is an essential element of Virginia’s Comprehensive Annual Financial Report (CAFR). • DOA prepares a CAFR annually, which the Auditor of Public Accounts audits. • Agency financial statements also must include lease information. Department of Accounts

  3. Purpose of LAS(Lease Accounting System) DOA maintains LAS, the Commonwealth’s web enabled Lease Accounting System to ensure: • Proper recording and retention of lease data. • Disclosure of lease activity in the agency’s and Commonwealth’s financial statements in accordance with GAAP. Department of Accounts

  4. Lease Definitions • A lease is an agreement conveying the right to use property, plant, or equipment, usually for a stated period of time. • A capital lease transfers ownership rights, risks, and rewards. • An operating lease does not transfer ownership rights and is similar to a rental. Department of Accounts

  5. Capital vs. Operating Leases The majority of leases in the Commonwealth are lessee leases. • An asset and liability are recorded for all lessee capital leases. • Rent expense is recorded for all lessee operating leases. An asset and liability are not recorded for operating leases. Department of Accounts

  6. Internal Controls • Lease input documents must be prepared in a timely and accurate manner. • Lease input documents must be reviewed and approved by authorized personnel. • Lease data entered in the system must be reconciled to source documentation (lease agreement). Department of Accounts

  7. Recent Developments • The SEC tackles practices for lease accounting. • Companies recording leasehold improvements (upgrades to leased property) and depreciating them over the life of the asset rather than the life of the lease. • Who was approving these transactions? Department of Accounts

  8. New Lease System DOA is developing a new web-based online lease system that will be available for Fiscal Year 2006. • Agencies will key transactions, so they must have an understanding of lease accounting. • DOA provided training on the system. Department of Accounts

  9. References • CAPP Manual Topics • 31205, Introduction to Lease Accounting http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/31205.pdf • DOA Directives • 2005 Financial Statement Directives http://www.doa.virginia.gov/Financial_Reporting/Directives/Directives_Main.cfm Department of Accounts

  10. Contacts • finrept@doa.virginia.gov • 804-225-2257 – voice • 804-225-2430 – facsimile • U. S. Mail: Virginia Department of Accounts Attention: Fixed Assets/Leases P. O. Box 1971 Richmond, VA 23218-1971 Department of Accounts

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