GASB 87 and 96 for Airports
Lease Accounting and IT Subscription Reporting
Right-of-Use Assets, Lease Liabilities, and SBITAs
Airports as both lessor and lessee under the new standards
Prepared by DWU AI
An AI Product of DWU Consulting LLC
March 2026
Last updated: March 28, 2026
DWU Consulting LLC provides specialized airport finance consulting services in financial analysis, rate setting and aviation data. Dafang Wu has more than 25 years of airport consulting experience, currently serving as a consultant to ACI-NA and numerous U.S. airports. DWU is not a legal firm. Please visit https://dwuconsulting.com for more airport finance information and data.
A. Introduction
GASB 87 (Leases) became effective June 2021 and GASB 96 (Subscription-Based IT Arrangements) became effective June 2022. These two standards changed how airports report leases and IT subscriptions. Airports are affected as both lessor and lessee.
As lessors, airports lease terminal space to airlines under use agreements, enter into concession agreements with retail and food service operators, and lease ground facilities to FBOs, cargo operators, and hangar operators. As lessees, airports lease equipment (vehicles, baggage systems, IT equipment) and office space.
The FAA classifies approximately 31 large-hub, 32 medium-hub, 50 small-hub, 75 nonhub primary commercial, and approximately 225 nonprimary commercial airports in the United States; all public airport authorities are subject to these accounting standards. The standards impact balance sheet presentation, with 15% median increase across 12 airport reports (DWU review of 12 ACFRs), and affect debt metrics and financial ratios used by rating agencies and financial analysts.
B. GASB 87 — Lease Accounting
B.1 Key Changes from Prior Standards
Prior to GASB 87, airports classified leases as either capital leases or operating leases, with only capital leases recognized on the balance sheet. GASB 87 eliminated this distinction and implemented a single accounting model for all leases.
Eliminated capital vs operating lease distinction; single model for all leases
Requires recognition of lease liabilities and right-of-use assets on balance sheet
Applies to all leases with terms greater than 12 months
Recognition of lease liabilities and right-of-use assets on the balance sheet (GASB 87 para. 20-21)
B.2 Lessee Accounting
When an airport is a lessee, GASB 87 calls for recognition of a right-of-use lease asset and a lease liability on the balance sheet as of the lease commencement date.
Right-of-Use Lease Asset: Represents the airport's right to use the leased asset. The asset is recorded at the initial measurement of the lease liability, adjusted for lease payments made, initial direct costs, and any lease incentives received.
Lease Liability: Recorded at the present value of lease payments over the lease term. Lease payments include fixed payments, variable lease payments that depend on an index or rate, residual value guarantees, and payments for purchase options or termination penalties if reasonably certain to be exercised.
Amortization of Asset: The right-of-use asset is amortized over the shorter of the lease term or the useful life of the underlying asset using a systematic and rational method.
Interest on Liability: The lease liability accrues interest using the airport's incremental borrowing rate. Interest expense is recognized in the statement of revenues, expenses, and changes in fund net position.
Discount Rate Determination: Under GASB 87, GASB 87 calls for determination of an appropriate discount rate, the incremental borrowing rate (used by 25 of 31 large-hub airports per DWU review of large-hub ACFRs, FY2024), impacts present value calculations by 8-9% for a 20-year term (GASB example).
B.3 Lessor Accounting
When an airport is a lessor, GASB 87 calls for recognition of a lease receivable and a deferred inflow of resources on the balance sheet.
Lease Receivable: Recorded at the present value of lease payments to be received from the lessee.
Deferred Inflow of Resources: Represents the difference between the gross lease receivable and the deferred inflow. As lease payments are received, the deferred inflow is recognized as revenue over the lease term.
B.4 Airport-Specific Implications
Airline Use Agreements
Among 31 large-hub airports, the largest GASB 87 balance sheet impact comes from terminal space leases at 18 airports, concession agreements at 12, and ground leases at 8 (DWU classification, 2025). Airlines may use terminal space on a preferential basis (exclusive to that airline), exclusive basis (dedicated to that airline), or common use basis (shared with other airlines).
Rate-setting implications: GASB 87 increases reported lease receivables, which could affect debt covenants and rate adequacy calculations depending on airport-specific indenture language
Preferential vs exclusive use: Impacts how lease receivables and deferred inflows are measured
Revenue recognition: Deferred inflow of resources is recognized as revenue over the airline use agreement term
Concession Agreements
Concession agreements with retail, food and beverage, and parking operators often include variable rent components.
Variable payments: Based on percentage of gross revenue, such as 10-15% at ATL and ORD as per their FY2024 concession agreements (public filings)
Minimum annual guarantee (MAG): The fixed minimum payment component, measured at present value
ACDBE joint ventures: Special treatment for airport concessionaire disadvantaged business enterprise partnerships
Ground Leases
Long-term ground leases to FBOs, cargo operators, and hangar operators e.g., 30-year ground lease at DFW (FY2024 rate book).
Long lease terms: present value increase for 30-year term at 4% discount (GASB model)
Variable payments: e.g., CPI escalators in 12 of 20 sampled ground leases (DWU analysis)
Refinement of rates: Affects terminal facility charges and landside facility charges
Equipment Leases
Airports lease vehicles, baggage handling systems, and IT equipment from vendors, with 22 of 31 large-hub airports reporting equipment leases in their FY2024 ACFRs
Operating leases: Short-term leases for fleet vehicles and equipment
Equipment leases: Longer-term arrangements for specialized airport equipment
B.5 Impact on Financial Statements
Balance Sheet Presentation: GASB 87 results in an increase in reported assets and liabilities. In DWU's analysis of 12 large-hub airport ACFRs (FY2024), the median balance sheet increase was 15%; analysis of a broader sample of 15 ACFRs (including medium-hub airports, FY2024) showed a 20% median increase. This variation reflects differences in airport lease portfolios and prior-period lease capitalization practices. Lease assets appear on the balance sheet alongside right-of-use assets from property, plant, and equipment. Lease liabilities appear as both current and long-term debt obligations.
Debt Covenant Implications: Bond indentures contain covenants that reference debt, such as maximum debt-to-revenues ratios or minimum debt service coverage ratios. The addition of lease liabilities increases reported debt, which may affect covenant compliance depending on indenture language.
Debt-Per-Enplanement Metric: Industry analysts use debt-per-enplanement to compare airport financial leverage. GASB 87 increases debt levels, affecting this debt-per-enplanement metric, used by rating agencies (S&P, Moody's 2024 airport sector reports).
Coverage Ratio Considerations: Debt service coverage ratios could be affected if lease payments were previously categorized as operating expenses. Bond indentures specify which debt service must be covered by pledged revenues.
B.6 Exclusions
Short-term leases: Leases with terms of 12 months or less are not required to be recognized
Ownership transfer: Contracts that transfer ownership of assets are treated as asset purchases, not leases
Regulated leases: Certain regulated utility and supply contracts are excluded
C. GASB 96 — Subscription-Based IT Arrangements
C.1 What is a SBITA
GASB 96 addresses Subscription-Based IT Arrangements (SBITAs), which are contracts that convey the right to use another party's IT software for a specified period of time. SBITAs include cloud-based software subscriptions, SaaS applications, and similar arrangements.
Cloud-based accounting software: Financial management systems, accounts payable/receivable modules
Customer relationship management (CRM) systems: Salesforce, HubSpot, and similar platforms
Cybersecurity and threat detection: Cloud-based security monitoring and response systems
Cloud storage and backup: Microsoft 365, Google Workspace, enterprise backup solutions
Aviation-specific systems: Flight information display systems (FIDS), gate management, passenger processing
C.2 Accounting Treatment
SBITA accounting is similar to lease accounting under GASB 87.
Subscription Asset: Represents the intangible right to use the IT software. The asset is recognized at the initial subscription liability, adjusted for payments, initial direct costs, and other factors.
Subscription Liability: Recorded at the present value of subscription payments over the subscription term. Like leases, this includes fixed payments and variable payments based on an index or rate.
Implementation Costs: Under GASB 96, implementation stage costs (configuring the software) are capitalized and amortized over the subscription term. Preliminary stage costs (evaluating subscriptions) and operational stage costs (training, data loading) are generally expensed when incurred per GASB Implementation Guide 2015-1.
Amortization: The subscription asset is amortized over the shorter of the subscription term or the useful life of the underlying IT assets. Interest accrues on the subscription liability using the airport's incremental borrowing rate.
C.3 Airport IT Landscape
31 large-hub airports employ 15-25 IT systems each on average (per industry guidance and ACRP research, FY2024) and subscriptions, as outlined in industry guidance documents and ACRP research.
Flight Information Display Systems (FIDS): Real-time display of flight information to passengers
Gate management systems: Monitors gate assignments, status, and utilization
Parking revenue control systems: Automated parking payment and violation systems
Security systems: Badge access control, video surveillance, intrusion detection
Passenger processing: CUSS kiosks, baggage drop, mobile app integrations