A lease, as defined in GASB 87, is a contract that conveys control of the right to use a physical asset (such as a building, vehicle, or equipment) for a period of time in exchange for consideration. The government records a lease liability and a corresponding lease asset representing its right to use the underlying asset.
A SBITA, as defined in GASB 96, is a contract that conveys control of the right to use a software application over a subscription term. These arrangements are typically cloud-based and subscription-based, and they require recognition of a subscription liability and a subscription asset on the balance sheet.
While both standards follow similar accounting models (recognizing a right-to-use asset and a corresponding liability) the nature of the asset (physical vs. digital), the terminology used, and some implementation details differ between GASB 87 and GASB 96.
What’s important here?
The main difference between a SBITA and a lease is the type of asset involved. Leases under GASB 87 relate to physical assets, while SBITAs under GASB 96 relate to software. Both standards require governments to report a right-to-use asset and a liability when certain criteria are met, but the terminology and specific accounting treatments are tailored to the nature of the asset. Understanding this distinction is important for applying the correct standard and maintaining accurate, compliant financial reporting.
