SaaS is popular across both the public and private sectors due to its scalability, lower upfront costs, and ease of implementation. In the public sector, SaaS is often used for accounting systems, payroll platforms, document management tools, and other essential functions.
Under GASB 96, many SaaS arrangements qualify as Subscription-Based Information Technology Arrangements (SBITAs). If the contract gives the government the right to use the software over a defined, noncancelable term, the arrangement likely falls under the scope of the standard. In these cases, the organization must recognize a subscription asset and a corresponding liability on its financial statements.
What is an example of SaaS?
An example of a SaaS product is Microsoft 365. Instead of installing the software on individual machines, users access applications like Word, Excel, and Outlook through the cloud by paying a recurring subscription fee.
Other examples include Google Workspace, Adobe Creative Cloud, and Salesforce.
In the public sector, tools like enterprise resource planning (ERP) systems and cloud-based document storage platforms are also commonly delivered via SaaS.
What’s important here?
SaaS is a cloud-based software delivery model where users subscribe to access applications hosted by a third-party provider. These arrangements are increasingly common in government and nonprofit organizations due to their flexibility and cost efficiency.
From an accounting perspective, SaaS contracts often fall within the scope of GASB 96 if they grant the right to use the software over a noncancelable period. When they do, organizations must report the agreement as a SBITA—recording a subscription asset and liability to reflect the financial impact of the contract.
Understanding whether a SaaS agreement meets GASB 96 criteria is important for proper financial reporting and compliance.
