A Quick Guide to GASB 96:Government Accounting for Subscription Software
GASB 96 has garnered significant attention recently, as it was issued on May 20, 2023. In this comprehensive guide, we will delve into what GASB 96 is, and its purpose for subscription-based information technology arrangements.
Subscription-Based Information Technology Arrangements (SBITAs), also known as SBITAs, refer to contractual agreements between government entities and technology service providers. These arrangements involve the provision of information technology (IT) services, software, or infrastructure on a subscription basis.
In an SBITA, instead of purchasing IT resources outright, the government pays a recurring subscription fee to access services or products. Let’s explore the key aspects and implications of this NEW and important accounting standard.
Understanding SBITAs
This subscription-based model allows governments to acquire IT capabilities quickly. The need for large upfront investments or long-term commitments is not required.
SBITAs typically offer a range of IT solutions, including:
- cloud computing services
- software-as-a-service (SaaS)
- platform-as-a-service (PaaS)
- infrastructure-as-a-service (IaaS)
These arrangements enable governments to access technologies, benefit from scalability and flexibility, and transfer operational responsibilities to the service provider.
Government SBITAs often come with subscription terms and conditions tailored to meet the unique requirements and regulations of the public sector. These agreements may address issues such as data security, privacy, compliance, service level agreements (SLAs), support, and governance.
By leveraging SBITAs, government entities can streamline their IT operations, improve efficiency, and focus on their core functions and services. The subscription model allows for easier budgeting and financial planning. This is due to costs spread out over time, and governments adjusting their subscriptions based on changing needs or scaling requirements.
Overall, government SBITAs provide a flexible and cost-effective approach for a period of time. Subscription payments are expected for governments to access and utilize IT services and solutions. Entities can you the software alone or in combination with other solutions. So, why did the Governmental Accounting Standards Board issue GASB 96?
Understanding GASB 96
GASB 96 issued statement no. 96, titled “Subscription-Based Information Technology Arrangements.” It provides guidelines for reporting and accounting for subscription-based information technology arrangements in the public sector. The requirements of this Statement are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.
Purpose of GASB 96
The primary purpose of GASB 96 is to improve financial reporting and transparency in the public sector. These arrangements typically involve the use of software licenses, cloud computing services, and other IT resources provided through subscription models.
GASB 96 aims to ensure consistent and accurate reporting of these arrangements. Subsequently enhancing the understanding of financial statements and facilitating decision-making.
Navigating GASB 96 Successfully
Adapting to GASB 96 may seem daunting, but with careful planning and execution, you can navigate this regulatory change effectively. Here are some steps to consider:
1. Education and Awareness: Familiarize yourself with the key provisions of GASB 96. Stay informed about updates, guidance, and interpretations provided by industry experts and professional accounting bodies.
2. Assessment of Current Arrangements: Review your existing subscription-based IT arrangements to identify those that fall under the scope of GASB 96. Seek guidance from accounting professionals if needed.
3. System and Process Review: Evaluate your current systems, processes, and controls to determine their adequacy in capturing and reporting the required information. Consider upgrading or implementing suitable software solutions and data management systems to ensure compliance.
4. Contract Evaluation and Documentation: Conduct a thorough review of your contractual agreements related to subscription-based IT arrangements. Ensure that contracts are appropriately documented, capturing the necessary information for accurate accounting and financial reporting.
5. Collaboration with Accounting Professionals: Engage accounting professionals with expertise in governmental accounting standards. Seek their guidance on interpretation, implementation, and ongoing compliance with GASB 96. Collaborate closely with them to ensure accurate financial reporting and adherence to regulatory requirements.
Conclusion
GASB 96 represents a significant development in the accounting landscape for subscription-based IT arrangements. For commercial real estate portfolio managers, understanding its implications and taking proactive steps to ensure compliance is crucial.
By staying informed and implementing the necessary changes, you can successfully navigate GASB 96 and maintain accurate financial reporting practices. Embrace this regulatory change as an opportunity to enhance transparency, streamline processes, and strengthen your practices.