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GASB 96 SBITAs: How Governments and School Districts Account for Subscription IT Arrangements

Sherman Hsieh
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GASB 96 SBITAs: How Governments and School Districts Account for Subscription IT Arrangements

Last updated: October 9, 2026 · Independent guide · We do not sell rankings or coverage.

A SBITA, or subscription-based information technology arrangement, is a contract under GASB Statement No. 96 that gives a state or local government, including a public school district or university, control of the right to use a vendor’s IT software for a period of time. Unless the arrangement is short-term (12 months or less including all options), you record a subscription liability for the present value of the payments and an intangible subscription asset. Cloud ERP, student information system and Microsoft 365 contracts are typical SBITAs.

GASB 96 in brief

  • Who it applies to: state and local governments that report under GAAP, including school districts, public colleges, special districts, cities and counties.
  • Requirement: recognize a subscription liability and subscription asset for every SBITA except short-term ones, capitalize initial implementation costs, and disclose the arrangements in the notes.
  • Threshold: GASB sets no dollar threshold. Each government sets a written materiality policy; published examples range from $50,000 (California) to $1,000,000 (Washington State).
  • Key dates: issued May 2020; effective for fiscal years beginning after June 15, 2022, so the year ended June 30, 2023 for most districts. GASB 104 adds separate disclosure of subscription assets for fiscal years beginning after June 15, 2025.
  • Official source: GASB Statement No. 96, summarized in the New York State Comptroller’s GASB 96 bulletin (July 2023). We checked the rule and every source below on October 9, 2026.

What GASB 96 requires

What counts as a SBITA

GASB defines a SBITA as “a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets,” for a period of time in an exchange or exchange-like transaction (NYS Comptroller, July 2023). Control means you can obtain the software’s service capacity and decide how it is used. New Jersey’s Office of Management and Budget suggests the simplest test: whether users can still log into the software or access the service after the agreement ends. If they cannot, the contract is likely a SBITA (NJ OMB Circular 23-05, no date shown).

School examples in auditor guidance include student information systems, remote learning platforms, cloud storage and email (Wisconsin DPI and auditor presentation, no date shown), plus DocuSign, Adobe Creative Cloud and Zoom (Yeo & Yeo, a CPA firm, no date shown).

The subscription term

The term is the period in which you have a noncancelable right to use the software, plus periods covered by an option to extend that you are reasonably certain to exercise and an option to terminate that you are reasonably certain not to exercise. Vendor options are assessed the same way. Periods in which both parties can cancel without the other’s permission are excluded. You reassess only when an option is exercised or not exercised against your earlier conclusion, or a contract-specified event occurs (Wyoming State Auditor’s Office, no date shown).

The three stages for implementation costs

Stage Typical activities Treatment
Preliminary project Conceptual formulation, evaluating alternatives, determining needed technology, final vendor selection Expense as incurred
Initial implementation Design, configuration, coding, testing, installation; data conversion needed to place the software in service Capitalize into the subscription asset (expense if the SBITA is short-term)
Operation and additional implementation Maintenance, troubleshooting, ongoing operations Expense, unless the work adds functionality or efficiency, then capitalize
Training (any stage) End-user and administrator training Always expense

Sources: California State Controller’s Office, February 2024 and the NYS Comptroller bulletin, which adds that data conversion is capitalized only when it is needed to place the asset into service.

Measurement and journal entries

The liability is the present value of the payments expected during the term. Discount at the rate the vendor charges, including an implicit rate, or at your estimated incremental borrowing rate if that rate cannot be readily determined. Variable payments based on future performance or usage stay out of the liability and are expensed as incurred. The asset equals the liability plus payments made to the vendor at or before commencement plus capitalized initial implementation costs, less incentives. Payments made before commencement sit in a prepayment until the term starts. You amortize the asset over the shorter of the term or the software’s useful life (NYS Comptroller; Wyoming SAO).

Governmental funds use modified accrual. At commencement the fund records an expenditure and an other financing source equal to the subscription liability, and later payments are debt service principal and interest. New York assigns account code 5781 to the financing source and 9781.6 and 9781.7 to principal and interest (NYS Comptroller). Use your own state’s chart of accounts.

Worked example: a cloud ERP subscription

Illustration only. These figures are constructed to show the mechanics and are not from any real contract. A school district signs a noncancelable five-year SaaS contract for a finance and HR system at $120,000 a year, billed annually in advance. Before go-live it pays $15,000 to a consultant for needs assessment and vendor selection, $60,000 to the vendor for configuration and data conversion, and $10,000 for staff training. It has no rate from the vendor and uses an incremental borrowing rate of 4%.

  1. Sort the costs. The $15,000 is preliminary project stage and the $10,000 is training, so both are expensed. The $60,000 is initial implementation and is capitalized, held as a prepayment until go-live.
  2. Liability. The first $120,000 is paid at commencement, so the liability covers the remaining four payments: $120,000 × 3.62990 = $435,587.
  3. Asset. $435,587 + $120,000 paid at commencement + $60,000 implementation = $615,587.
  4. Year 1. Amortization is $615,587 ÷ 5 = $123,117. Interest is $435,587 × 4% = $17,423, so the $120,000 paid at the start of year 2 splits into $17,423 interest and $102,577 principal, leaving a liability of $333,010.
Account Debit Credit Basis and timing
Prepaid subscription costs / Cash $60,000 $60,000 Government-wide, during implementation
Subscription asset $615,587 Subscription liability $435,587; Cash $120,000; Prepaid $60,000 Government-wide, commencement
Amortization expense $123,117 Accumulated amortization $123,117 Government-wide, year 1
Interest expense $17,423 Subscription liability (or accrued interest) $17,423 Government-wide, year 1 accrual
Expenditures, capital outlay $435,587 Other financing source, SBITAs $435,587 General fund, commencement
Expenditures (implementation, first payment) $180,000 Cash $180,000 General fund, when paid
Expenditures, debt service principal / interest $102,577 / $17,423 Cash $120,000 General fund, start of year 2

The $15,000 and $10,000 are expensed on both bases, and rounding leaves a few dollars to absorb in the final payment.

Who is exempt

  • Short-term SBITAs. A SBITA with a maximum possible term of 12 months or less, including any options to extend regardless of probability, is expensed as paid. For contracts either party can cancel, the maximum term is the notice period (Wyoming SAO). A one-year contract with a one-year renewal option is therefore not short-term.
  • Perpetual licenses. These are intangible assets under GASB 51, not SBITAs.
  • Hardware leases with incidental software. If the software is insignificant compared with the equipment, such as a smart copier, the contract stays under GASB 87.
  • Support-only contracts, public-private partnerships under GASB 94, and software you pass through to others (California SCO).

Below-threshold SBITAs are not exempt from the standard, but your materiality policy can let you expense them. New York says SBITA thresholds “should be determined and established independently of any pre-existing capitalization or lease thresholds” (NYS Comptroller). Published thresholds vary widely: $50,000 in total payments for California state departments (California SCO, December 2022), $100,000 for New Jersey agencies (NJ OMB) and the University of South Carolina, and $1,000,000 for Washington State agencies (Washington OFM, May 26, 2022).

Deadlines and penalties

GASB 96 applied to fiscal years beginning after June 15, 2022, with changes applied retroactively by restating prior periods if practicable, or otherwise as a restatement of beginning net position or fund balance (NYS Comptroller). From fiscal years beginning after June 15, 2025, GASB 104 requires subscription assets to be disclosed separately from other capital assets (CPA Practice Advisor, October 17, 2024).

GASB itself imposes no penalties. Its former chairman told Congress that “the GASB does not have enforcement authority” and that compliance is enforced through state laws and through the audit process (Robert Attmore, House testimony, March 28, 2012).

Records you must keep

  • The signed contract, order forms and every amendment, with the term analysis and option assessment.
  • A cost log by stage, with invoices showing which charges were capitalized and which were expensed.
  • The discount rate used and how you determined it.
  • Amortization schedules and note workpapers: a description of each arrangement, subscription assets and accumulated amortization, five-year principal and interest maturities, variable payments, commitments not yet commenced, and impairments (California SCO).

What to set up in your systems

Build the SBITA inventory from AP and contract data

The University of South Carolina’s controller reviews general ledger spending on software and IT subscriptions, the IT department’s software inventory, IT vendor activity and existing IT leases, and notes that “a good identifier is a term on the contract or invoice” (USC, March 2025). A practical sequence:

  1. Export two years of AP and purchasing card payments coded to software, technology and subscription accounts, then group by vendor and flag recurring payments and invoices with service periods.
  2. Match each vendor to a contract from procurement or your contract management system, and to the IT department’s application list to find contracts paid centrally or by schools. Our guide to CLM for SaaS agreements covers tools that keep those terms in one place.
  3. Apply the log-in test, the 12-month test and your threshold, then record vendor, description, location, GL account, term, costs and extension options for each SBITA, the fields Yeo & Yeo suggests collecting.
  4. Add a SBITA question to the requisition form so new subscriptions are caught at intake.

Which systems track SBITAs

Government ERPs with a lease module. California requires departments on FI$Cal, the state’s ERP, to use its Lease Administration module for qualifying SBITAs; it calculates the subscription asset, amortization, subscription liability and discount amortization by SBITA and fund, and generates the journal entries (California SCO, December 2022). Oracle published a partner post showing PeopleSoft Lease Administration configured for GASB 96 without customization, with separate components for preliminary, implementation, operating and improvement costs (Oracle PeopleSoft blog, March 7, 2023). In our searches we did not find public documentation of a dedicated SBITA module from the main K-12 ERP vendors, so ask yours directly whether its lease or fixed asset module handles subscription assets and modified accrual entries.

Add-on lease and debt tools. DebtBook says it generates “all schedules, audit notes, and journal entries necessary to comply with GASB 96” (DebtBook, no date shown). FinQuery says it produces fund-level modified accrual entries and converts them to full accrual (FinQuery, modified September 7, 2026). Crunchafi (formerly LeaseCrunch, renamed June 25, 2025) documents a GASB 96 reporting entity with subscription asset and liability GL mapping, and says existing GASB 87 users need no additional license (Crunchafi, no date shown). None publishes pricing, and none of the pages we read claims to find SBITAs in your AP data. Subscription asset classes also need a home in your fixed asset accounting software for the GASB 104 disclosure.

How we researched this

We read state guidance on GASB 96 from New York, California, Wyoming, Washington, New Jersey and the University of South Carolina, plus CPA firm and vendor materials, reporting vendor statements as claims. We also reviewed the pages ranking for “SBITA” (the Wyoming and California state guides, Deloitte, PYA and insightsoftware); none worked a full numeric example with fund-level entries or explained how to build the inventory from AP data. We checked all sources on October 9, 2026. The worked example is our own illustration.

Related guides

Frequently asked questions

What is a SBITA in simple terms?

It is a software subscription a government controls for a set period, such as a cloud ERP or student information system contract. If the term is longer than 12 months including options, GASB 96 requires you to record a subscription asset and liability rather than expensing each payment.

Is Microsoft 365 a SBITA?

Usually yes, because users lose access when the subscription ends. Whether you record it depends on the term: a multi-year enterprise agreement above your threshold is capitalized, while a month-to-month or annual plan with no renewal option is short-term and expensed.

Are implementation costs capitalized under GASB 96?

Initial implementation costs such as configuration, testing, installation and necessary data conversion are capitalized into the subscription asset. Preliminary project costs, routine operating costs and all training are expensed.

Is there a dollar threshold for SBITAs?

GASB sets none. Your governing body sets a written materiality policy, and published state thresholds range from $50,000 to $1,000,000 in total contract payments.

Sources

Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more
Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...

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