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AULDIN 18 <br /> & ENKINS <br /> Comments, Recommendations, ORANGE COUNTY <br /> and Other Issues (Continued) NORTH CAROLINA <br /> ■ New GASB Pronouncements for Future Years (Continued) <br /> Statement No. 87, Leases (Continued) <br /> A lessor should recognize interest revenue on the lease receivable and an inflow of resources (for example, revenue)from the deferred inflows <br /> of resources in a systematic and rational manner over the term of the lease. The notes to financial statements should include a description of <br /> leasing arrangements and the total amount of inflows of resources recognized from leases. <br /> Lease Modifications and Terminations: An amendment to a lease contract should be considered a lease modification, unless the <br /> lessee's right to use the underlying asset decreases, in which case it would be a partial or full lease termination. A lease termination should be <br /> accounted for by reducing the carrying values of the lease liability and lease asset by a lessee, or the lease receivable and deferred inflows of <br /> resources by the lessor, with any difference being recognized as a gain or loss. A lease modification that does not qualify as a separate lease <br /> should be accounted for by re-measuring the lease liability and adjusting the related lease asset by a lessee and re-measuring the lease <br /> receivable and adjusting the related deferred inflows of resources by a lessor. <br /> Subleases and Leaseback Transactions: Subleases should be treated as transactions separate from the original lease. The original <br /> lessee that becomes the lessor in a sublease should account for the original lease and the sublease as separate transactions, as a lessee and <br /> lessor, respectively. <br /> A transaction qualifies for sale-leaseback accounting only if it includes a sale. Otherwise, it is a borrowing. The sale and lease portions of a <br /> transaction should be accounted for as separate sale and lease transactions, except that any difference between the carrying value of the <br /> capital asset that was sold and the net proceeds from the sale should be reported as a deferred inflow of resources or a deferred outflow of <br /> resources and recognized over the term of the lease. <br /> A lease-leaseback transaction should be accounted for as a net transaction. The gross amounts of each portion of the transaction should be <br /> disclosed. <br /> 14 <br />