What Triggers Recognition of a SBITA?
A SBITA should be recognized on the balance sheet at the commencement of the subscription term that is, when the government gains control of the right to use the IT asset.
This typically occurs when:
- The implementation phase is complete
- The software is accessible and operational
- The organization begins benefiting from the software’s functionality
Important: Signing a contract or beginning implementation does not trigger recognition. The SBITA is not recorded on the balance sheet until the software is ready to use.
What is Recognized?
Once the subscription term begins, two key components must be recognized:
1. Subscription Asset
Represents the right to use the software over the subscription term. This is recorded at the present value of subscription payments, plus any capitalizable implementation costs incurred before the subscription term begins.
2. Subscription Liability
Represents the obligation to make future payments under the contract. This is recorded at the present value of expected subscription payments over the non-cancellable term (and any reasonably certain renewals).
How to Determine the Commencement Date
To identify the correct date for recognition:
- Review the contract to determine when the government will gain access to and control of the software
- Confirm that any implementation services or system configuration have been completed
- Coordinate with your IT and procurement teams to verify the go-live date
This date becomes the trigger point for recording the SBITA on your statement of net position.
What's Important Here
You must recognize a SBITA on the balance sheet when the subscription term begins, not when the contract is signed or implementation starts. At that point, the government records a subscription asset and a subscription liability, measured at the present value of the expected payments. Getting the timing right is important for GASB 96 compliance, accurate reporting, and clear communication with stakeholders and auditors.
