What your organization should know about GASB 96
September 15, 2023
If your organization is like most, it relies on several—if not dozens—of software applications to complete processes ranging from payroll to event management, which likely translates to numerous software subscriptions. Now, thanks to Governmental Accounting Standards Board (GASB) Statement No. 96, your organization will need to account for and disclose these subscriptions.
Of course, gathering information on software subscriptions across multiple departments could be a headache, particularly for large organizations. To keep you from pulling out your hair to comply with GASB 96, which is effective for fiscal years beginning after June 15, 2022, here’s what you should know about it.
What is GASB 96?
GASB 96 provides guidance on accounting and financial reporting for software subscriptions as well as others that fall under the standard’s definition of “subscription-based information technology arrangements (SBITAs).” Examples of SBITAs include software and web-based subscriptions for technology, as well as certain memberships.
Simply put, GASB 96 establishes that a SBITA results in a right-to-use subscription asset, which is an intangible asset, and therefore has a corresponding subscription liability.
How does your organization need to do to comply?
To comply with GASB 96, you must gather all of the supporting documentation for your organization’s SBITAs, determine applicability, and record the liability for their current and future costs. For example, if your organization has a three-year membership to Adobe, you’ll need to determine how much the membership will cost your organization over the next three years and record this amount as a liability now.
What’s more, complying with GASB 96 involves following a set of capitalization criteria for costs beyond the subscription payment, such as implementation costs. You must also include certain disclosures about SBITAs in your organization’s financial statements.
What do you need to do now?
If you haven’t already, you’ll need to compile your organization’s SBITA documentation together by its next audit. In other words, now is the time to prepare this information for your organization’s financial reports—and to make sure it’s accurate and complete.
As I mentioned, gathering, compiling, and doing the accounting for your organization’s SBITAs can be a challenge. If you’re feeling overwhelmed by the task, Abdo can help light the way forward. Depending on your organization’s needs, we can work with you to inventory your SBITAs and report them correctly on your financial reports.
If you have questions about complying with GASB 96 or would like to learn more about how we can help, connect with us today.