Subscription-Based Information Technology Arrangements (SBITAs)
Effective: Fiscal years beginning after June 15, 2022 (FY2023)
GASB 96 defines the accounting treatment for cloud computing contracts and other IT subscription arrangements. Modeled closely after GASB 87, it requires governments to recognize a right-of-use subscription asset and a corresponding subscription liability for qualifying arrangements.
Key Provisions
- Right-of-use subscription asset (intangible)
- Subscription liability at present value of payments
- Three-stage implementation cost capitalization model
- Short-term exception for subscriptions ≤12 months
- Discount rate guidance mirrors GASB 87
- Amortization over shorter of subscription term or useful life
- Variable payments based on usage expensed as incurred
- Retroactive application at transition
What Is a SBITA?
A subscription-based information technology arrangement (SBITA) is a contract that conveys control of the right to use another party's IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction. Common examples include cloud-based ERP systems, SaaS financial management platforms, hosted permitting systems, and subscription-based cybersecurity tools.
Recognition Model
The subscriber (government) recognizes a right-of-use subscription asset — an intangible asset — and a corresponding subscription liability at the commencement of the subscription term. The subscription liability equals the present value of subscription payments expected to be made during the subscription term. The subscription asset equals the subscription liability, adjusted for payments made before commencement, capitalizable implementation costs, and any incentives received.
Implementation Costs
GASB 96 provides specific guidance on capitalizing implementation costs, divided into three stages: (1) Preliminary Project Stage — costs are expensed as incurred; (2) Initial Implementation Stage — costs are capitalized as part of the subscription asset; (3) Operation and Additional Implementation Stage — costs are generally expensed, except for costs that add significant new functionality. Data conversion costs are expensed unless they provide additional functionality.
Relationship to GASB 87
GASB 96 explicitly mirrors GASB 87's framework. The discount rate guidance, short-term exception (12-month maximum possible term), and general measurement principles are substantively identical. Governments that have implemented GASB 87 will find the SBITA framework familiar. The key difference is the nature of the underlying asset — IT software rather than a tangible asset.
Transition and Implementation
Governments apply GASB 96 retroactively by recognizing subscription assets and liabilities for SBITAs that were in effect at the beginning of the earliest period restated. For most governments, this means evaluating all IT contracts to determine which qualify as SBITAs versus service contracts.