Under GASB 96, costs incurred during the implementation period are not included in the subscription asset. Instead, these costs are typically expensed as incurred, unless they meet specific criteria for capitalization under other accounting guidance. Only costs incurred after the subscription term begins (and that directly relate to the right to use the software) can be included in the subscription asset.
This period is important for financial reporting because it defines when the subscription liability and asset should be recognized. Neither the subscription asset nor the liability appears on the balance sheet until the subscription term begins, meaning organizations must carefully track when implementation activities end and the actual usage period starts.
What's Important Here?
The implementation period in a SBITA covers the time spent preparing the software for use before the subscription term officially begins. Under GASB 96, costs during this period are generally expensed, not capitalized, and the subscription asset and liability are not recognized until the subscription term starts. Clearly identifying the end of the implementation period is essential for accurate financial reporting and for ensuring organizations comply with GASB 96 requirements.
