GASB 96: Understanding SBITA in 2025

As the need for new accounting guidelines arises, accounting organizations work to craft rules that address gaps in current principles. One such organization is GASB, the Governmental Accounting Standards Board, which develops standards in financial accounting and reporting to foster visibility and clarity. A recent example is the creation and implementation of GASB 96, developed in response to the increased popularity of Subscription-Based Information Technology Arrangements (SBITAs).

What Is GASB 96?

GASB 96 is a statement by the Governmental Accounting Standards Board that provides guidance on accounting and financial reporting best practices for SBITAs, specifically regarding contracts with governments and government entities. More specifically, GASB 96:

1. 1.Defines a SBITA.
2. 2.Establishes that a SBITA arrangement results in an intangible subscription asset and a corresponding subscription liability.
3. 3.Provides capitalization criteria for items such as implementation costs.
4. 4.Requires governments and their entities to note disclosures regarding SBITAs.
5. 5.Defines the term of the subscription as the period during which the government entity has a noncallable right to use the underlying IT assets.

What Is a SBITA?

SBITA stands for Subscription-Based Information Technology Arrangements. These arrangements have become popular due to the rise of cloud computing for storing information and utilizing IT services. Governments often enter into contracts to use these cloud services for a specific period, making these contracts similar to leases, as two parties agree upon the temporary use of an asset.

What Counts as a SBITA?

Key points regarding SBITAs:

• ​GASB 96 applies only to government entities, not IT vendors.
• ​SBITAs under GASB 96 grant government entities the right to use IT software at their present service capacity for any purpose the government entity desires (a subscription asset).
• ​SBITAs predominantly come in the form of Software as a Service (SaaS), Platforms as a Service (PaaS), and Infrastructure as a Service (IaaS). Examples include Canvas, Skyward, Microsoft Teams, Dropbox, and LeaseCrunch (now Crunchafi).

Accounting for SBITAs According to GASB 96

SBITAs should be accounted for similarly to leases under GASB 87. When a government entity enters into a SBITA, they recognize the subscription asset and a related subscription liability on financial statements. The value is determined by calculating the present value of future subscription payments due over the subscription term using the identified discount rate. The government entity should then amortize these assets systematically over the subscription term, reducing the subscription liability by payments made during the term.

Impact of GASB 96 on Financial Statements

GASB 96 affects all parts of financial statements:

• ​Assets: Recognition of intangible right-of-use (ROU) subscription assets, capitalization of implementation costs, accumulated amortization of SBITA assets, and potential impairment considerations.
• ​Liabilities: Recognition of short-term and long-term SBITA liabilities, present value of future subscription payments, and implementation costs.
• ​Income Statement:
  • ​Expenses: Amortization of SBITA assets, interest expense on SBITA liabilities, short-term SBITA expenses, maintenance and support costs, and variable payment expenses.
  • ​Operational impact: Changes in expense recognition patterns, new expense categories, potential budget impacts, and modified expense allocations.
• ​Cash Flow Statement:
  • ​Operating activities: Payments for short-term SBITAs, variable payments not included in lease liability, maintenance and support payments.
  • ​Financing activities: Principal payments on SBITA obligations and interest payments on SBITA liabilities.

Capitalization of Subscription-Based Costs

Capitalization is an accounting term that spreads out the cost of an asset over its useful life. For a SBITA, instead of incurring the cost all at once, the cost is spread over the SBITA’s term. Costs to be capitalized include:

• ​Fixed payments
• ​Variable payments that depend on an index or rate
• ​Non-refundable upfront fees (e.g., implementation or set-up costs)
• ​Other fixed payments

Footnote Disclosure Requirements for a SBITA

Footnote disclosures under GASB 96 should include:

• ​Description of the SBITA, including its basis, terms, and conditions for variable payments not included in the subscription liability measurement.
• ​The sum of subscription-based assets and related accumulated amortization, disclosed separately from other capital assets.
• ​Outflow of resources recognized in the reporting period for variable payments not previously included in the subscription liability measurement. Other payments, such as termination penalties not included in the subscription liability, should also be disclosed.
• ​Principal and interest requirements to maturity, presented separately for the subscription liability for each of the five subsequent fiscal years and in five-year increments thereafter.
• ​Details of SBITAs that have been committed but not yet commenced.
• ​Components of any loss associated with an impairment.
• ​Balance restatement details for the fiscal year 2023 only.

GASB 96 is closely related to the lease accounting standard GASB 87.

GASB 96 Note Disclosures

GASB 96 note disclosures require:

• ​Description of a SBITA agreement
• ​Financial disclosures
• ​Future payment obligations
• ​Any changes and modifications made to the SBITA

Measuring the Initial Subscription Liability

The initial subscription liability represents the obligation a government has to any IT vendor over the contract term. To measure it:

• ​Calculate the present value of future payments by applying the discount rate to future subscription payments.
• ​Use the rate implicit in the contract if available; otherwise, use the incremental borrowing rate.

Measuring a SBITA Asset

A SBITA asset is measured as the sum of:

1. 1.The initial subscription liability amount
2. 2.Payments made to a SBITA vendor before the commencement of the subscription term
3. 3.Capitalizable implementation costs

The Three Stages of a SBITA

Amortization of the subscription asset should be recognized as an outflow of resources over the subscription term. Activities should be accounted for as part of the three stages of a SBITA:

1. 1.Preliminary Project Stage: Activities associated with the decision to obtain the technology. Costs incurred here are expensed as incurred.
2. 2.Initial Implementation Stage: Activities include designing, configuration, coding, testing, and installation of the subscription assets. These charges are capitalized as part of the subscription asset.
3. 3.Operation and Additional Implementation Stage: Activities related to maintenance, troubleshooting, and ongoing access to the IT assets. Some activities in this stage may be capitalized as part of the subscription asset.

Common GASB 96 Compliance Mistakes to Avoid

GASB 96 became effective for fiscal years beginning after June 15, 2022, and for all reporting periods thereafter, with a requirement to restate prior periods. This statement applies to all state and government entities with in-scope SBITAs. Common compliance issues include inaccurate lease data and poor documentation.

To avoid these mistakes, it is recommended to use dedicated SBITA and lease accounting software, which helps maintain compliance with new lease and SBITA accounting standards through streamlined and automated processes.

GASB 96 FAQs

What Is a Short-Term SBITA under GASB 96?

SBITAs with a term of 12 months or less are considered short-term and are exempt from being recognized as a subscription asset or liability. The maximum term includes renewals or extensions.

What Is GASB Summary Statement No. 96?

GASB Summary Statement No. 96 provides guidance on accounting and financial reporting for Subscription-Based Information Technology Arrangements (SBITAs), aiming to increase consistency and transparency across government entities.

What Is the Difference Between GASB 87 and 96?

GASB 87 and GASB 96 both provide accounting standards that capitalize assets for different areas. GASB 87 requires government entities to recognize a lease liability and a right-of-use asset on tangible assets. GASB 96 defines SBITAs and provides standards for their accounting and financial reporting.

What Is an Example of a SBITA?

Examples of SBITAs include Software as a Service (SaaS) platforms like Slack, Zoom, or LeaseCrunch (now Crunchafi), as well as Platforms as a Service (PaaS) and Infrastructure as a Service (IaaS).

Does LeaseCrunch, now Crunchafi Lease Accounting, Handle Calculations for GASB 96?

Yes, LeaseCrunch (now Crunchafi Lease Accounting) is designed to implement GASB 96 for SBITAs.

GASB 96 must be implemented for fiscal years beginning after June 15, 2022, with a requirement to restate all prior periods presented.

If the Initial Application Date for GASB 96 is different from that used for GASB 87, a new Reporting Entity should be created with the Initial Application Date for GASB 96. It is recommended to name the Reporting Entity with “GASB 96” for easy distinction (e.g., My Municipality - GASB 96).

Next, create a new Asset type called SBITA in Administration - Customization. Once subscriptions are added with the appropriate Reporting Entity and Asset Type, run appropriate reports by selecting this information from the filters on My Leases, noting that the Footnote Disclosure for GASB 87 and GASB 96 should be run separately.