These arrangements are common in government and nonprofit sectors and often qualify as Subscription-Based Information Technology Arrangements (SBITAs) under GASB 96.
Key Features of Multi-Year Subscriptions
Multi-year software subscriptions usually include:
- A fixed subscription term (ex. 36 months)
- Recurring payments, either annually or up front
- Access to cloud-based or hosted software
- Vendor support, maintenance, and updates during the subscription term
These arrangements help organizations lock in pricing, improve budgeting predictability, and secure long-term access to essential technology.
Example of a Multi-Year Subscription
Suppose a municipality signs a three-year contract with a cloud-based budgeting platform. Under this agreement, the city pays a fixed annual fee to access the software, which is hosted and maintained by the vendor. The city doesn’t own the software but can use it for the duration of the contract.
This is a classic example of a SBITA that must be accounted for under GASB 96, including recognition of the subscription liability and capitalization of eligible implementation costs.
Multi-year software subscriptions create long-term financial commitments that must be recognized in accordance with GASB 96. Properly accounting for these agreements helps governments maintain transparency, ensure compliance, and reflect their technology obligations accurately in financial statements.
What's Important Here?
A multi-year software subscription provides extended access to IT software without ownership and typically meets the criteria of a SBITA under GASB 96. These agreements require careful evaluation and accounting, including recognition of the full subscription term and related costs making it essential for finance teams to understand their structure and reporting requirements.
