GASB addresses subscription-based technology arrangements

By Ken Tysiac

GASB issued accounting and financial reporting guidance Friday for subscription-based information technology arrangements used by state and local governments.

The accounting guidance for these subscriptions, which have become increasingly common in recent years, is included in GASB Statement No. 96, Subscription-Based Information Technology Arrangements. The new standard is based on the rules established in Statement No. 87, Leases.

Statement 96:

  • Defines a subscription-based technology arrangement as a contract that conveys control of the right to use a vendor’s software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period in an exchange or exchange-like transaction.
  • Requires governments with subscription-based technology arrangements to recognize a right-to-use subscription asset — an intangible asset — and a corresponding subscription liability. There is an exception for short-term subscription-based technology arrangements (those with a maximum possible term of 12 months).
  • Provides guidance related to outlays other than subscription payments, including implementation costs and requirements for note disclosures related to a subscription-based technology arrangement.

The guidance is intended to prevent inconsistencies in accounting and financial reporting for subscription-based technology arrangements. Existing GASB standards address computer software that is internally developed or purchased through perpetual licensing agreements, but questions have arisen about cloud computing and other subscription-based forms of software applications and storage.

Statement 96 takes effect for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. Early application is encouraged, but GASB moved the effective date one year later than the suggested date in its exposure draft to provide relief for preparers because of the coronavirus pandemic.

Ken Tysiac ( is the JofA’s editorial director.


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