The subscription term is the period during which a government has the noncancellable right to use the software provided under a SBITA. It includes:
- The initial, noncancellable period
- Any optional renewal periods reasonably certain to be exercised
- Any optional termination periods reasonably certain not to be exercised
This means the subscription term may be longer than the base contract period if it’s likely the government will renew or not terminate the agreement early.
The length of the subscription term directly affects the recognition and amortization of the subscription asset and liability. Accurately determining this term ensures compliance with GASB 96 and improves the transparency of financial reporting related to long-term software commitments.
What’s important here?
The subscription term under GASB 96 includes both the noncancellable period and any additional time the government is reasonably certain to continue using the software. Getting this right is crucial for proper financial reporting, as it shapes the entire accounting treatment of a SBITA.
