Article

Preparing for GASB No. 96 implementation

Nov 18, 2023·Authored by Jodi Dobson

After providing guidance for the accounting and reporting of leases under GASB No. 87, the Government Accounting Standards Board issued Statement No. 96 which applies similar accounting and reporting concepts to subscription-based information technology arrangements (SBITAs). It has become common for governments to enter into subscription-based contracts to use vendor-provided information technology (IT).

Prior to the issuance of GASB No. 96, there was no accounting or financial reporting guidance specifically for SBITAs.

GASB No. 96 is effective for periods ending June 30, 2023 and after, so the time to prepare is now.

Definitions

A subscription-based information technology arrangement (SBITA) is a contract that conveys control of the right to use another party’s (SBITA vendor) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in a contract for a period of time in an exchange or exchange like transaction.

Control of the right to use the underlying IT assets includes both of the following as specified in the contract:

The right to obtain the present service capacity from use of the underlying IT assets
The right to determine the nature and manner of use of the underlying IT assets

Similarities and differences with GASB No. 87 lease accounting

Key criteria	Consistent with leases	New for SIBTA
Term of subscription	☑
Definition of short term	☑
Measurement of liability	☑
Discount rate	☑
Measurement of right to use asset		Provides consideration for implementation costs, similar to those in GASB No. 51
Remeasurement requirements	☑
Phased implementation		Provides asset is placed into service when first module is functional and implemented
Multiple components	☑
Terminations	☑
Disclosures	☑
Applies to users and owners		Only applies to government use of another party’s software (not to governments that charge for the use of their software assets)

Terminology	SBITAs	Leases
Parties	IT vendor (nongovernmental) and government	Lessor/lessee
Intangible right-to-use asset	Subscription asset	Lease asset
Underlying asset	Underlying IT assets	Underlying asset
Liability	Subscription liability	Lease liability

Implementation considerations

All SBITAs meet the definition of a lease, so the application or classification depends on the primary underlying asset.

IT assets (software) alone follow GASB No. 96
Tangible capital asset with insignificant software component follows GASB No. 87
All other IT assets (software) in combination with tangible capital assets follow GASB No. 96