United States

Proposed accounting guidance for subscription-based IT arrangements


The Governmental Accounting Standards Board recently issued an Exposure Draft, Subscription-Based Information Technology Arrangements, to propose guidance on the accounting and financial reporting for cloud computing and similar subscription-based information technology arrangements (SBITAs). Similar to the provisions of Statement No. 87, Leases, the Exposure Draft proposes:

  • Defining an SBITA as a contract that conveys control of the right to use an SBITA vendor’s hardware, software or both, including IT infrastructure, for a period of time in an exchange or exchange-like transaction.
  • Governments with SBITAs would recognize a right-to-use subscription asset (an intangible asset) and a corresponding subscription liability. The subscription liability would be measured at the present value of subscription payments expected to be made during the subscription term. The subscription asset would be recognized and initially measured as the sum of the initial subscription liability amount, payments made to the SBITA vendor before commencement of the subscription term and capitalizable implementation costs.
  • An exception for short-term SBITAs that have a maximum possible term of 12 months (including any options to extend, regardless of their probability of being exercised). Subscription payments for short-term SBITAs would be recognized as outflows of resources.
  • Capitalization criteria for outlays other than subscription payments, including implementation costs of SBITAs
  • Requiring note disclosures of essential information regarding SBITAs, other than short-term SBITAs

If finalized, the proposed Statement would be effective for fiscal years beginning after June 15, 2021, and all reporting periods thereafter. The Exposure Draft is available for comment until August 23, 2019.