GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs), was issued in May 2020. The statement establishes guidelines for state and local governments for accounting and financial reporting of subscription-based information technology arrangements (SBITAs), which are essentially cloud computing and other IT service arrangements.
GASB 96 is effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. Early application of the statement is encouraged.
GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs), provides guidance for state and local governments on accounting and financial reporting for subscription-based information technology arrangements. This statement was issued in May 2020 and addresses the accounting treatment for cloud computing and other IT service arrangements in the public sector.
The main specifics of GASB Statement No. 96 include:
- Definition: GASB 96 defines a Subscription-Based Information Technology Arrangement (SBITA) as a contract that conveys control of the right to use a vendor’s IT software, alone or in combination with tangible capital assets (such as hardware), as specified in the contract, for a period of time in an exchange or exchange-like transaction.
- Capitalization: GASB 96 requires governments to capitalize subscription-based IT arrangements as right-to-use subscription assets, which are intangible assets, and recognize a corresponding subscription liability. This treatment is similar to the approach used for leases under GASB Statement No. 87.
- Measurement: The initial measurement of the subscription asset should be based on the total subscription liability, which includes the present value of future payments for the SBITA, plus any one-time payments made at the beginning of the contract, minus any incentives received from the vendor.
- Amortization: The subscription asset should be amortized over the shorter of the SBITA’s useful life or the contract term, including any options to extend if it is reasonably certain those options will be exercised.
- Recognition of outflows: Outflows of resources (e.g., implementation costs) incurred by the government in a subscription-based IT arrangement should be recognized as expenses, unless they meet the criteria for capitalization.
- Disclosures: Governments should provide note disclosures in their financial statements related to the SBITA, including a general description of the arrangement, the total amount of the subscription asset, and the total amount of outflows of resources recognized for the arrangement.
GASB Statement No. 96 is effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. Early application is encouraged.