Following the Governmental Accounting Standards Board (GASB) regulations is essential in government accounting. One of the newest standards, GASB Statement No. 96 (GASB 96), offers guidance on accounting and financial reporting for subscription-based information technology arrangements (SBITAs). This standard aims to enhance the transparency and consistency of government entities’ financial reporting with regard to such types of contracts. While it might initially seem challenging, a systematic approach can help your organization easily navigate and fulfill all the requirements.

What is a SBITA?

An SBITA is any IT software subscription contract that complies with GASB 96. More specifically, an IT software arrangement may be an SBITA if it meets all the following criteria:

  • This document conveys control of the right to use another party’s IT software for a specified period.
  • The transaction is an exchange or exchange-like transaction.
  • If an intangible asset is combined with a tangible capital asset, the software’s cost is not insignificant compared to that of the underlying tangible capital asset.

Here are some examples of potential SBITAs that your organization might have:

  • Data backup and storage
  • Tax collection software
  • Fixed asset software
  • Budgeting software
  • Utility metering
  • ERP systems

Why is compliance important?

Compliance with GASB 96 ensures an accurate representation of your organization’s financial obligations and resources. This transparency is essential for stakeholders, including taxpayers, policymakers, and investors, to make informed decisions based on reliable financial information.

The step-by-step compliance checklist

Inventory existing IT contracts

Begin by compiling a comprehensive list of all existing IT software contracts. This action aims to identify which contracts qualify as SBITAs under GASB 96. A centralized database to track and manage these contracts will simplify updates and references.

Determine GASB 96 applicability

Evaluate every contract using GASB 96 criteria to differentiate SBITAs from those eligible for exclusion. Focus on contracts where the subscription term is greater than one year. This step ensures clarity and the proper categorization of contracts.

Review policies and procedures

Update your organization’s policies and procedures to align with GASB 96 requirements. Ensure all relevant staff are aware of the new standards and their roles in compliance. Conduct training sessions to familiarize staff with the updated processes and ensure smooth implementation.

Establish roles and responsibilities

Clearly define who will enter data, review entries, and record transactions in the accounting software you’ve selected. Establishing a well-defined process for managing SBITAs can prevent misunderstandings and guarantee the completion of all tasks.

Prepare for data entry

Review and update the master indexes used for SBITAs to ensure accuracy and consistency in data entry. Regularly auditing these indexes can prevent discrepancies and maintain data integrity.

Attend training

Participate in training sessions on SBITAs. Staying updated on best practices and new developments in GASB 96 compliance will enhance your organization’s preparedness. Encourage multiple team members to attend these sessions for broader knowledge dissemination.

Enter SBITAs

By the specified deadline, add qualifying SBITAs to the accounting system, accurately recording them as “Other Assets” with “Software” as the asset type. Starting the entry process early will help address potential issues before the deadline.

Review and release batches

Confirm the accuracy of recorded data in your accounting software and make the necessary adjustments to maintain compliance. Setting regular review schedules will keep the process on track.

Assist with initial entries

Collaborate with the financial office to record beginning balance entries and review the data. This ensures a smooth transition and an accurate starting point for compliance. Maintaining open communication will provide timely support and guidance.

Continuous updates

As new contracts are signed or existing ones are amended, the accounting software should be regularly updated. Keeping your records current reflects the latest contractual obligations. Implementing a system for automatic reminders and updates for contract changes can streamline this process.

Periodically reconcile accounting entries with your reporting system and make necessary adjustments to ensure consistency and accuracy in financial reporting. This proactive approach helps catch and correct discrepancies early, maintaining the reliability of your financial data.

Complete disclosure forms

Finally, fill out and submit the required disclosure forms by the specified deadlines to provide comprehensive and transparent financial information. Thoroughly reviewing forms before submission helps avoid errors and omissions, ensuring compliance.

Make GASB 96 compliance simple with EZLease

Navigating GASB 96 compliance can feel overwhelming, but using this checklist and example resources will help simplify the process for your organization. By methodically tackling each step, you can keep your organization compliant and enhance financial transparency and accountability. Staying proactive and organized is very helpful for effectively managing your SBITAs under GASB 96.

Check out EZLease for a complete solution to handling and maintaining GASB 96 compliance. We help and support to make lease accounting easier and align your organization with the latest standards.