Important distinctions for GASB 87 and GASB 96
GASB 87 and GASB 96 are both accounting standards issued by the Governmental Accounting Standards Board (GASB), but they address different topics and have distinct objectives:
GASB 87 – Leases:
- Objective: GASB 87, titled "Leases," primarily focuses on accounting for leases, including both lessees (government entities that lease assets) and lessors (entities that lease assets to governments).
- Scope: GASB 87 provides guidelines for recognizing, measuring, and reporting leases, whether they are finance leases or operating leases, in the financial statements of state and local government lessees and lessors.
- Key Points: This standard introduces criteria to determine whether a lease should be classified as a finance lease or an operating lease and outlines the accounting treatment for each type of lease.
GASB 96 – Subscription-Based Information Technology Arrangements (SBITAs):
- Objective: GASB 96, titled "Subscription-Based Information Technology Arrangements," specifically addresses the accounting and financial reporting of Subscription-Based Information Technology Arrangements (SBITAs) by state and local government entities.
- Scope: GASB 96 provides guidance on how to recognize and report SBITAs in the financial statements of government entities. It focuses on contracts that grant access to information technology (IT) software, alone or in combination with tangible capital assets.
- Key Points: GASB 96 establishes criteria for identifying SBITAs, defines the terms and conditions that must be met for an arrangement to be considered an SBITA, and provides accounting rules for recognizing and measuring SBITAs in financial statements.
Notable similarities & differences between GASB 87 and GASB 96
GASB 87 and GASB 96 share a few notable similarities:
- Term Calculation: To calculate the term for a GASB 87 or GASB 96 agreement, entities must measure the term based on each standard's respective restatement date.
- Liability & Asset: GASB 87 and GASB 96 agreements share similar methodology for the liability and asset calculations.
- Subscription and Non-Subscription Components or Multiple Subscription Components: GASB 96 treats Subscription and Non-Subscription Components or Multiple Subscription Components in the same regard as GABS 87 lease, non-lease and multiple lease components.
There are a few key differences to note between GASB 87 and GASB 96:
- No Lessee/Lessor: Unlike leases, GASB 96 subscriptions only go in one direction - the government entity is always using a vendor's IT software
- Outlays (Expenses): Additional payments made other than the recurring Subscription payment are treated differently than similar payments for GASB 87 leases
- Additional Determination Questions: Government entities must consider additional factors such as perpetual licensing or a combination of a software and a tangible asset when classifying their SBITA's.
What’s important here?
In summary, GASB 87 deals with leases, covering a broader range of assets and contracts involving leases, while GASB 96 specifically addresses Subscription-Based Information Technology Arrangements (SBITAs), which involve IT software access and related tangible capital assets. Each standard has its own set of rules and guidelines tailored to its respective subject matter.
