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
Exclusions
- Perpetual licenses
- Support services
- PPP contracts as defined in GASB No. 94
- Contracts where your government is the IT vendor
Where do SIBTAs exist in governments?
- Accounting and finance
- Information technology
- Human resources
- Public works
- Public safety
- Utilities
- Communications
- Education
- Recreation
- Legal
What types of IT software could be included?
- Accounting, purchasing, payroll
- SCADA
- Websites
- Project management
- Inventory
- Virtual learning
- Curriculum
- Access management
- Scheduling, timekeeping
- Permitting/ticketing
- Document management
Next steps
Population
- Identify who may have contracts
- Create complete list of potential subscriptions
Evaluation
- Obtain contracts for review
- Gather key data to determine applicability
Calculation
- Select discount rate based on implementation date
- Calculate present value of subscription assets and liabilities
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
