GASB 96 + Subscription-Based Information Technology Arrangements
Paul Baumert, Healthcare Consulting Shareholder
July 15, 2022
Governmental entities are required to implement GASB 96 for fiscal years beginning after June 15, 2022. It provides guidance on financial reporting regarding Subscription-Based Information Technology Arrangements (SBITAs). SBITAs are contracts that convey control of the right to use a third party's software, with or without tangible capital assets, in an exchange or exchange-like transaction over the term of the contract.
The new standard requires recording a right-to-use subscription asset (intangible asset) and a corresponding liability on the balance sheet.
The asset is recorded as the sum of the initial subscription liability amount, payments made to the third-party vendor before the start of the subscription term, and capitalizable implementation cost, less any incentives received from the third-party vendor at or before the commencement of the subscription term.
The liability is recorded at the present value of subscription payments expected to be made during the subscription term discounted using the interest rate the third-party vendor charges or the governmental entity’s incremental borrowing rate if the third-party’s interest rate is not determinable.
The asset is amortized as an outflow of resources over the subscription term. The subscription liability is reduced as payments are made, and interest expense is recognized as an outflow of resources. Financial statement disclosures regarding SBITAs will also be required. If you have any questions on this topic, please contact us.
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Healthcare Consulting Shareholder
Paul Baumert is a Consulting Shareholder at Lutz. He began his career in 1998. He specializes in accounting and consulting for healthcare and nonprofit industries with a focus on financial management support services and reimbursement analysis.
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