GASB 96 defines a SBITA as a contract that conveys control of the right to use another party’s information technology (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.

To determine whether a contract conveys control of the right to use the underlying IT assets, an agency must assess whether it has the right to:

• Obtain the present service capacity from use of the underlying IT assets as specified in the contract.
  –AND–
• Determine the nature and manner of use of the underlying IT assets as specified in the contract.

Subscription Term

The subscription term is the period during which the agency has a noncancellable right to use the underlying IT assets in addition to the following periods covered by an option to:

• Extend if it is reasonably certain that the agency or vendor will exercise that option.
  –OR–
• Terminate if it is reasonably certain that the agency or vendor won’t exercise that option.

Periods for which both the agency and the SBITA vendor have an option to terminate the SBITA without permission from the other party (or if both parties must agree to extend) are cancellable periods and are excluded from the subscription term.

Note: A fiscal funding or cancellation clause in a SBITA must affect the subscription term only if it is reasonably certain that the clause will be exercised (for example: severe state cutbacks). If it is reasonably certain that the contract will NOT be cancelled due to funding, the agency must include the SBITA.

Sample

The following is an example of how to determine the subscription term.

Sample Agency has executed a contract for a SBITA. The subscription term is established based on the following key dates:

• Contract execution date of Dec. 1, 2021 – this is the date the contract was signed.
• Go-Live date of Sept. 1, 2022 – this date is the commencement date of the subscription because it signifies the end of the initial implementation phase. The commencement date is the date Sample Agency records the subscription liability and subscription asset.
• Initial subscription end date of Dec. 31, 2025, for the first 3-year term of the SBITA.
• Final contract end date of Dec. 31, 2028, which includes the renewal term that Sample Agency is reasonably certain to exercise.

The subscription term is 76 months.

GASB 96 explicitly excludes contracts that only provide the agency IT support services but does include contracts providing IT support services in conjunction with the right to use a related IT asset. The following are also exempt from the scope of GASB 96:

• Contracts that meet the definition of a lease under GASB Statement No. 87, Leases — this may occur when a contract includes both a software component and a capital asset component where the capital asset’s cost significantly exceeds the software cost.
• Agencies that provide other entities the right to use their own IT software and associated tangible assets through a SBITA.
• Contracts that meet the criteria for GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements.
• Any licensing arrangements providing the agency a perpetual license to use a vendor’s computer software falling under the scope of GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets.

Short-Term Exception

GASB 96 provides an exception for short-term SBITAs, which have a maximum possible term under the SBITA contract of 12 months or less. Subscription payments for short-term SBITAs must be recognized as an outflow of resources (for example, expenses).