GASB Proposes Guidance on Cloud Computing and Similar Subscription-Based Information Technology Arrangements
Norwalk, CT, May 21, 2019—The Governmental Accounting
Standards Board (GASB) has proposed new guidance on the accounting and
financial reporting for subscription-based information technology
arrangements (SBITAs), which have become increasingly prevalent among
state and local governments over the past several years.
The Exposure Draft, Subscription-Based Information Technology Arrangements, effectively would apply many of the provisions of Statement No. 87, Leases, to subscription-based transactions. The Exposure Draft proposes:
In addition, the Exposure Draft includes proposals related to outlays
other than subscription payments, including implementation costs and
note disclosures related to a SBITA.
- Defining a SBITA as a contract that conveys control of the right to
use a SBITA vendor’s hardware, software, or both, including IT
infrastructure, for a period of time in an exchange or exchange-like
- Governments with SBITAs would recognize a right-to-use subscription
asset and a corresponding subscription liability (with an exception for
short-term SBITAs with a maximum term of 12 months).
Although existing GASB literature addresses on-premise computer
software—either internally developed or acquired through perpetual
licensing agreements—stakeholders have raised questions regarding the
proper accounting for and reporting of cloud computing and other
remote-access forms of software applications and data storage, which are
subscription based. The lack of guidance caused inconsistency in
accounting and financial reporting for SBITAs.
The proposed Statement would be effective for fiscal years beginning
after June 15, 2021, and all reporting periods thereafter. Early
application would be encouraged.
The Exposure Draft is available on the GASB website, www.gasb.org. The GASB invites stakeholders to review the proposal and provide comments by August 23, 2019.