State and Local Governments: Gear Up for GASB 96

For June 30 year ends, we are a year into the implementation of GASB Statement No. 87, Leases (GASB 87). If that wasn’t a heavy enough lift, we now have the implementation of GASB Statement No. 96 (GASB 96), Subscription-Based Information Technology Arrangements (SBITAs), staring us in the face.

This standard was released in March 2021 and became effective for reporting periods beginning after June 15, 2022. This new standard will impact how state and local governments report and disclose their use of subscription-based technology services.

The objective of GASB 96 is to provide guidance on accounting for and disclosing SBITAs. SBITAs are contracts where a vendor provides access to one or more software applications or information technology services where the customer pays a subscription fee for access to those services.

To prepare for this standard, you should consider the following steps.

Create an inventory of any and all potential SBITAs

Management should work with all department heads — particularly the information technology department — to identify any potential SBITAs. The finance department should also review the general ledger for recurring payments that might indicate the presence of SBITAs.

Analyze each potential SBITA for applicability to the standard

The specific criteria for identifying a SBITA can be complex; however, here are some guidelines to help identify which contracts will be included as an asset and a corresponding liability on the government-wide financial statements:

• To be considered a SBITA, you must have the right to take possession of the software or underlying technology and use it for your own purposes. To determine applicability to the standard, municipalities should review their contracts and assess their level of control over the software or underlying technology.
• Contracts with a perpetual license to use an asset are excluded from GASB 96.
• Many technology contracts will automatically renew each year. Contracts that include an option to terminate without permission are excluded from the subscription term and therefore may be considered short-term SBITAs.

Determine your method of implementation

There are many options available to aid in the implementation of the standard. Like GASB 87, Leases, complex calculations are required for each SBITA. The standard can be implemented in-house, a third-party software subscription can be purchased, or you could use the assistance of your audit firm. If you decide to go with a third-party software, make sure you consider it as a SBITA.

How we can help

The implementation of GASB 96 will be time intensive, like GASB 87. It is important to be proactive and follow the steps outlined in this article to set you up for success. If you would like assistance implementing the standard, please contact our audit team.