Is the Skybox the Limit on GASB 87?
As the new academic year starts, thoughts turn not only to books but to college football. Fans are dusting off their tailgating gear and ready to claim their season tickets. And for a lucky few, that means skybox seats. But will GASB 87 and its new guidance on leases cause a wrinkle in your institution’s financial reporting when it comes to multi-year skybox commitments?
Spoiler alert… no. But it’s a topic to mull as more types of university contracts are considered.
GASB 87 introduced major changes for higher education on how leases are recognized. These changes significantly impacted financial statements and other reporting practices. As implementation has progressed across the industry, more unforeseen scenarios emerge — resulting in more questions.
This brings us to skyboxes, which are usually reserved by people or organizations for an entire football season. Some enter into multi-year contracts to lock their reservations down long term. It’s no surprise that schools are asking whether these contracts be seen as leases. After all, the party reserving the skybox has exclusive use of the facility, yet they don’t own it.
Then why is the answer no? Because a key element of any lease contract is the conveyance of control over the nonfinancial asset that is being leased. In the case of skybox agreements, the party has access to the skybox during the home football games and for a set number of hours before and after them. But they can’t live in it, host a movie night there, etc. It’s just for game-day use as specified in the contract.
This falls under GASB 87’s text of “the right to determine the nature and manner of use of the underlying asset as specified in the contract.” And that control lies with the athletic organization.
While skybox use doesn’t fall under the definition of a lease, more questions like this are bound to come up. Golf course maintenance equipment, for example, is regularly leased. How will that be affected by this standard? And while software subscriptions aren’t part of GASB 87, they are addressed by another standard taking effect in 2023.
Our higher education team will continue monitoring these questions as they arise. We’re here to help, whether it is to discuss a particular lease in question, submit inquiries of unique situations to GASB, or assist you in tracking your leases.
Other Posts You Might Like