What Does Reassessment Mean?
Reassessment means revisiting the original assumptions about the subscription term, especially related to renewal or termination options. If circumstances change and it becomes reasonably certain that a government will (or will not) exercise an option it hadn’t previously planned for, the subscription term must be updated to reflect the new expectation.
This reassessment affects the measurement of the subscription liability and asset, requiring a remeasurement and potential adjustments to financial reporting.
What Does Reassessment Mean?
You must reassess the subscription term if either of the following occurs:
- The government elects to exercise a renewal or termination option it previously wasn’t reasonably certain to exercise.
- The government no longer expects to exercise a renewal or termination option it was previously reasonably certain to exercise.
In both cases, the original subscription term changes based on new information, and the subscription liability and asset must be remeasured accordingly.
Failing to reassess the subscription term when required can lead to inaccurate reporting of long-term obligations and noncompliance with GASB 96. Timely reassessment helps ensure transparency and that financial statements reflect an organization’s current expectations and commitments.
What's Important Here?
Reassessment of the subscription term is required when there is a significant change in the government’s intent or certainty regarding renewal or termination options. Monitoring these changes and updating the financial reporting accordingly ensures compliance with GASB 96 and promotes accurate, up-to-date accounting for IT subscriptions.
