![]() At year end, FAR collects and analyzes information from tubs regarding all lease costs and commitments (both operating and finance) and supplies this information to external auditors.įor lessor arrangements, FAR has the following responsibilities: Work with the responsible school/unit to determine the appropriate accounting treatment for leases over the identified thresholds below, including necessary journal entries.Ĭontact: Associate Director of Financial Reporting or your Tub Analyst With information supplied by the tubs at year-end, FAR records the operating lease assets and liabilities on the tub balance sheet each year end and disclosing all other supplementary required information pertaining to leases. Tubs are also responsible for processing journal entries to adjust operating lease payments to a straight-line basis, where required.įor lessor arrangements, those Tubs that are lessors must notify FAR of leases that meet the thresholds noted under Section III and work with FAR to determine the appropriate accounting treatment, including necessary journal entries.įinancial Accounting and Reporting (FAR) maintains this policy and provides guidance regarding the policy.įor lessee arrangements, FAR has the following responsibilities: With information supplied by the tubs at lease commencement, FAR records the initial setup of finance lease assets and liabilities, for providing the amortization schedule for the lease liability, and for recording depreciation of the finance lease asset. Schools and Tubs are responsible for making all payments and journal entries. School/unit finance offices (Tubs) are responsible for ensuring that local units abide by this policy and the accompanying procedures.įor lessee arrangements, Tubs must notify FAR of leases that meet the thresholds noted under Section I below as they arise throughout the year, no later than quarter end, and must disclose finance and operating lease commitments for which the University is a lessee as part of the year-end financial reporting process. Harvard University schools, tubs and local units may have related local policies as long as they are consistent with and meet the minimum standards set by University Policies If a University Policy conflicts with any other University Policy, term, external regulation, or law, the more restrictive provision will apply. This policy applies to all new leases entered into as of note that addenda to and extensions of existing leases may qualify as new leases for purposes of this policy. This policy provides guidance on determining the classification of an identified lease arrangement (i.e., for lessees: finance or operating for lessors: direct financing, sales-type or operating) and establishes uniform thresholds and procedures when recording a lease.Īll Harvard University schools, tubs, local units, Affiliate Institutions, Allied Institutions and University-wide Initiatives must comply. Generally accepted accounting principles requires both lessees and lessors to recognize the effect of a leasing contract on the balance sheet. ![]() Please reach out to Financial Accounting and Reporting (FAR) for agreements not covered by this or the Software Accounting Policy. The lessee is determined to have control of the use of an asset if it has the ability to determine how the asset is used and the right to substantially all of the economic benefits arising from the asset.Ĭontracts that convey the right to use an asset other than PP&E are not covered by this policy. The proper lease classification is important because it determines the University’s accounting and reporting requirements.Ī lease exists when there is a contract, or part of a contract, which conveys the right to control the use of an identified asset (property, plant, or equipment – PP&E) for a period of time in exchange for consideration (i.e., payment). There are three types of leases for a lessor: direct financing, sales-type, and operating leases. There are two types of lease classifications for a lessee: finance and operating. The lessor is the owner of the assets identified in the agreement. The lessee is the party granted use rights of an asset as part of an agreement. This policy establishes accounting treatment for lease agreements and agreements that contain lease components entered into by the University, both as a lessee and as a lessor.
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