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GASB 96 Subscription-Based IT Arrangements 

In December 2022, the Division of Controller sent the meeting invites to central office directors.  The meeting (1) informed offices of the coming implementation of the Government Accounting Standards Board (GASB) Statement No. 96 - Subscription-Based Information Technology Arrangements (SBITAs); (2) announced the development of a SharePoint site that will be used to gather SBITA documents; and (3) requested each office to identify which of their employees should have access to that site.  The SharePoint site will be available in 2024, for offices to begin uploading their documents at the link below:

https://mcgov.mcpsmd.org\\...

Detailed instructions on how to use the SharePoint site will be attached to later correspondence. Additional information below will provide further guidance on which contracts should uploaded.

Identifying SBITA/Definition

A SBJTA contract is defined as a contract that conveys control of the right to use another party's IT software, alone or in combination with tangible capital assets, as specified in the contract for a period of time in an exchange or exchange-like transaction. SBITAs have the following defining characteristics:

 

  • They are for the temporary use rather than ownership of the IT asset (use ends when subscription ends)
  • They grant a government control of the right to use a SBITA vendors' IT assets, and
  • They are exchange or exchange-like
  • Includes contracts that contain both a right-to-use IT asset component and an IT support services component.

Examples of SBITAs: a cloud computing arrangement, which may be provided as Software as a Service (SaaS), Platform as a Service (PasS), or Infrastructure as a Service (IaaS).

SBITAs That Do Not Need to be Uploaded

The following are exceptions and do not need to be uploaded to the SharePoint site:

  • SBITAs that include perpetual
  • Short-Term SBITAs that has a maximum possible te1m of 12 months (or less) at the commencement of the subscription term.
  • SBITAs that convey control of the right to use another party's IT software alone or in combination with tangible capital assets that meets the definition of a lease per GASB 87, Leases, in which the software component is insignificant when compared to the cost of the underlying tangible capital asset.
  • Arrangements that solely provided IT suppo11
  • SBITAs that have a total contract price of less than $10,000.

Determining the Subscription Term

The subscription term is the period during which a government has a noncancellable right to use the underlying IT assets plus the following periods, if applicable:

  • Periods covered by a government's option to extend the SBITA if it is reasonably certain that the government will exercise that option.
  • Periods covered by a government's option to terminate (cancellation for convenience clause) the SBITA if it is reasonably certain that the government will not exercise that option.
  • Periods covered by a SBITA vendor's option to extend the SBITA if it is reasonably certain that the SBITA vendor will exercise that option.
  • Periods covered by a SBITA vendor's option to terminate the SBITA if it is reasonably ce1tain that the SBITA vendor will not exercise that option.
  • A fiscal funding or cancellation clause that allows a government to cancel a SBITA, should affect the subscription term only if it is reasonably certain that the clause will be exercised. (i.e., fiscal funding or cancellation clauses are ignored unless reasonably certain of being exercised).
  • Periods for which both the government and SBITA vendor have an option to terminate the SBITA without permission from the other party are cancellable periods and are excluded from the subscription term.

Other Items for Consideration

  • Preliminary Project Stage costs include evaluating alternatives, determining needed IT, and selecting a SBITA vendor. This should be expensed as incurred.
  • Initial Implementation Stage costs include costs of system customizations/configurations, testing, data migration, installation, costs necessary to place the subscription asset into service. This should be capitalized as part of the subscription Only training costs should be expensed as incurred, regardless of the stage in which they are incurred.
  • Operation and additional implementation stage costs include costs associated with subsequent implementation activities, maintenance, other operational activities. This should be expensed as incurred, except for outlays that increase the functionality and efficiency of the subscription