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COUNTY OF ADAMS, PENNSYLVANIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2025

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F) Assets, Liabilities, and Net Position or Fund Balances (Continued)

17. Leases/Subscription Liability

The County is a lessee for a noncancellable leases of equipment and finance of software contracts. The County recognizes a lease liability/subscription liability and an intangible right-to-use lease asset (lease asset)/subscription asset in the government-wide financial statements. The County recognizes lease/subscription liabilities with an initial, individual value of $5,000 or more.

At the commencement of a lease/subscription agreement, the County initially measures the lease/subscription liability at the present value of payments expected to be made during the lease term. Subsequently, the lease/subscription liability is reduced by the principal portion of lease/software agreement payments made. The lease/subscription asset is initially measured at the initial amount of the lease/subscription liability, adjusted for lease/software payments made at or before the commencement date, plus certain initial direct costs. Subsequently, the lease/subscription asset is amortized on a straight-line basis over its useful life.

3. Key estimates and judgements related to leases include how the County determines (1) the discount rate it uses to discount the expected lease/software agreement payments to present value, (2) lease/software agreement term(s), and (3) lease/software agreement payments.

The County uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the County generally uses its estimated incremental borrowing rate as the discount rate for leases/software agreements.

- The lease/software agreement term includes the noncancellable period of the lease/software agreement. Lease/subscription payments included in the measurement of the lease/subscription liability are composed of fixed payments and purchase option price that the County is reasonably certain to exercise.

The County monitors changes in circumstance that would require a remeasurement of its lease/software agreement and will remeasure the lease/subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the lease/subscription liability.

Lease/subscription assets are reported with other capital assets and lease/subscription liabilities are reported with long-term debt on the statement of net position.

G) Adoption of Governmental Accounting Standards Board Statements

The County adopted the provisions of GASB Statement No. 102, “Certain Risk Disclosures”. The adoption of this statement had no effect on previously reported amounts.