GASB Issues Proposed Guidance on Cloud Computing and Subscription-Based Information Technology

The Governmental Accounting Standards Board (GASB) published the Exposure Draft, Subscription-Based Information Technology Arrangements. The Exposure Draft proposes new guidance on the accounting and financial reporting for subscription-based information technology arrangements. The comment deadline is August 23, 2019.

The Increasing Need for Guidance on Accounting for Cloud Computing Arrangements

The GASB has proposed this guidance because subscription-based information technology arrangements, particularly cloud computing arrangements, have become increasingly prevalent among state and local governments over the past several years.

Existing GASB literature addresses on-premise computer software, either internally developed or acquired through perpetual licensing agreements, but it does not provide requirements for subscription-based information technology arrangements. GASB stakeholders have raised questions regarding the proper accounting for and reporting of cloud computing and other remote-access forms of software applications and data storage, which are subscription based. The lack of guidance caused inconsistency in accounting and financial reporting for subscription-based information technology arrangements.

The GASB Proposals

The proposals in the Exposure Draft, if adopted as currently proposed, effectively would apply many of the provisions of GASB Statement No. 87, Leases, to subscription-based transactions.

If adopted as proposed, the guidance would:

  • Define a subscription-based information technology arrangement as a contract that conveys control of the right to use a SBITA vendor’s hardware, software, or both, including IT infrastructure, for a period of time in an exchange or exchange-like transaction; and
  • Provide that governments with subscription-based information technology arrangements would recognize a right-to-use subscription asset and a corresponding subscription liability (with an exception for short-term SBITAs with a maximum term of 12 months).

The Exposure Draft also includes proposals related to outlays other than subscription payments, including implementation costs and note disclosures related to a subscription-based information technology arrangement.

Effective Date

The proposed Statement would be effective for fiscal years beginning after June 15, 2021, and all reporting periods thereafter. Early application would be encouraged.


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