GASB Statement No. 96 (SBITAs) is a standard issued by the Governmental Accounting Standards Board to improve how governments report subscription-based IT arrangements—think cloud software, SaaS platforms, and similar contracts. Effective for fiscal years beginning after June 15, 2022, GASB 96 brings these agreements onto the balance sheet, increasing transparency and consistency in financial reporting.
What GASB 96 Requires
Under GASB 96, governments must recognize:
- A subscription liability (the obligation to make payments), and
- A corresponding intangible right-to-use asset
- This approach mirrors the framework established in GASB Statement No. 87, extending similar accounting treatment to IT subscriptions rather than physical leases.
Key Implementation Challenges
- Identifying SBITAs
- Many organizations struggle to determine which contracts fall under GASB 96. IT agreements are often bundled with services, maintenance, or hardware, making it difficult to isolate qualifying subscription components.
- Data Collection and Contract Inventory
- Governments frequently lack a centralized repository of IT contracts. Gathering all relevant agreements across departments can be time-consuming and prone to omissions.
- Complex Measurement Requirements
- Calculating the subscription liability involves estimating discount rates, subscription terms, and variable payments. These estimates require judgment and can vary significantly across entities.
- System and Process Changes
- Legacy accounting systems may not support the tracking and amortization of SBITA assets and liabilities. Many entities must implement new tools or modify workflows, which can be costly and resource-intensive.
- Cross-Department Coordination
- Successful implementation requires collaboration between finance, IT, procurement, and legal teams—groups that may not traditionally work closely together.
- Ongoing Compliance and Monitoring
- After initial adoption, governments must continuously reassess contracts for modifications, renewals, or terminations, adding an ongoing administrative burden.
Conclusion
While GASB 96 enhances financial transparency and aligns reporting with modern technology usage, implementation can be challenging. Organizations that invest early in contract inventory, cross-functional communication, and system readiness are better positioned to comply efficiently and avoid reporting risks.