GASB 87 vs ASC 842: What's the Difference for Lease Accounting?

Short answer: GASB 87 and ASC 842 are two lease accounting standards for two different worlds. ASC 842, from the FASB, applies to private companies and nonprofits in the United States. GASB 87, from the GASB, applies to state and local governments and public agencies. The biggest structural difference is that GASB 87 uses a single model for lessees (there is no operating versus finance split), while ASC 842 keeps that classification. Both, though, pull leases onto the balance sheet.

If you are a city, a county, a public university, a school district, or a special authority, you report under GASB, not FASB, and that one fact rules out a surprising amount of lease software that only speaks ASC 842. This guide covers what each standard requires, the specific places they diverge, and why the standard you report under is a hard filter when you choose a tool.

Who has to follow GASB 87 vs ASC 842?

The dividing line is the type of entity. ASC 842 is issued by the Financial Accounting Standards Board and applies to private and public companies, partnerships, and nonprofit organizations that follow US GAAP. GASB 87 is issued by the Governmental Accounting Standards Board and applies to governmental entities: states, cities, counties, public colleges and universities, school districts, utilities, transit authorities, and similar public bodies. A private hospital follows ASC 842; a public one likely follows GASB 87. If you receive federal funding but are not a government, you are still on ASC 842. The question is simply whether you are a government reporting entity.

What is the single-model approach in GASB 87?

This is the difference practitioners feel most. Under ASC 842, a lessee classifies each lease as either finance or operating, and that choice changes how expense hits the income statement over the life of the lease. GASB 87 throws that split out for lessees. Almost every lease that conveys the right to use an asset for more than a short period is treated one way: the government records a lease liability and an intangible right-to-use lease asset, then recognizes interest expense on the liability and amortization of the asset over the term. There is no straight-line operating-lease expense line in GASB 87. One model, applied consistently, which many government finance teams find simpler to administer even though it looks unfamiliar coming from GAAP.

How do GASB 87 and ASC 842 treat the balance sheet?

Here the two standards actually agree on direction. Both were written to end off-balance-sheet lease treatment, so both put a lease liability and a corresponding lease asset on the statement of financial position for leases beyond a short-term threshold (generally twelve months). The measurement is similar in spirit: the liability is the present value of future lease payments discounted at the rate in the lease or an incremental borrowing rate, and the asset is built from that liability plus certain adjustments. The terminology differs. ASC 842 calls it a right-of-use asset; GASB 87 calls it a right-to-use lease asset. The mechanics of accretion and amortization rhyme closely. So the recognition philosophy is shared even where the classification and expense patterns diverge.

What about GASB 96 and SBITAs?

Governments have a companion standard that private companies do not. GASB 96 covers subscription-based information technology arrangements, or SBITAs, and it applies GASB 87 style logic to software subscriptions: a subscription liability and a right-to-use subscription asset. If you are a government, you may need to account for your cloud software the way you account for your leases, which is another line item your software has to support. Private companies under ASC 842 do not have a GASB 96 equivalent, so a tool built purely for FASB filers will not have this capability at all.

Why does the standard you report under matter for software?

Because lease accounting platforms are not all built to the same standards, and coverage is a hard yes-or-no. Many popular tools support ASC 842 and IFRS 16 but stop there. If you are a government that needs GASB 87 and GASB 96, those tools are simply the wrong category, no matter how good they are at what they do. When we compare vendors, standards coverage is one of the first filter rows: in our Black Owl Systems vs Trullion comparison, for instance, one platform lists GASB 87 support and the other does not, which decides the shortlist instantly for a public-sector buyer. Our best lease abstraction software roundup lays out which tools cover which standards across the field.

Governments implementing the standard also still have to keep paying and recording those lease and subscription invoices on schedule, which is far less painful once you automate the accounts payable behind them rather than tracking each due date by hand.

The step both standards assume you have already done

Whether you report under GASB 87 or ASC 842, the accounting cannot begin until you have accurate lease data, and government lease portfolios are notoriously scattered: land leases, building leases, vehicle and equipment leases, and now software subscriptions, often held across departments with no central record. Before any schedule can be built, someone has to read each agreement and pull the commencement date, the term, the payment schedule, the escalations, the renewal and termination options, and the discount rate inputs. Doing that by hand across hundreds of documents is where GASB 87 and GASB 96 implementations stall.

Lease abstraction handles that first step. You upload the lease or subscription agreement and its amendments, the AI reads the full document set, and you get the terms as structured, verified fields, each linked back to the source page so an auditor can trace any number to its clause. You can export the result to Excel, CSV, or JSON and load it into a GASB-compliant accounting engine. Test it on one of your own agreements free, with no signup, on our lease abstraction software page. Getting clean data out of the documents first is what turns a stalled implementation into a manageable one.

The bottom line

GASB 87 governs government lease accounting; ASC 842 governs private companies and nonprofits. The defining difference is the single-model approach: GASB 87 drops the operating-versus-finance classification for lessees and treats nearly every lease the same way, while ASC 842 keeps it. Both put leases on the balance sheet, and governments carry an extra standard, GASB 96, for software subscriptions. The standard you report under is not a preference, it is a hard requirement, so confirm your software supports it before anything else, and abstract your lease documents into clean data before you try to account for them.