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.
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:
|Key criteria||Consistent with leases||New for SIBTA|
|Term of subscription||☑|
|Definition of short term||☑|
|Measurement of liability||☑|
|Measurement of right to use asset||Provides consideration for implementation costs, similar to those in GASB No. 51|
|Phased implementation||Provides asset is placed into service when first module is functional and implemented|
|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)|
|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|
All SBITAs meet the definition of a lease, so the application or classification depends on the primary underlying asset.