Understanding SBITAs: Subscription Based Information Technology Arrangements

What is a Subscription Based Information Technology Arrangements (SBITA)? 

It is a contract where one party temporarily gains control over the usage rights of another party’s IT software, independently or in combination with tangible capital assets, as specified in the contract for a limited time, not perpetual, in an exchange transaction. 

These arrangements (1) must be temporary, (2) grant a Public Housing Authority (PHA) control of the right to use the software, AND (3) must be exchange or exchange-like transactions. 

Collecting Your SBITAs 

To determine if a contract grants control, a PHA needs to assess whether or not it possesses the following:

• The right to obtain the present service capacity by utilizing the underlying IT assets.

• The right to determine the nature and manner of use of the underlying IT assets. 

This assessment requires collaboration with the IT Department, Department Heads, and Procurement.

Exemptions

GASB 96 explicitly excludes the following types of contracts:

• Contracts that only offer IT support services. GASB 96 includes contracts that provide IT support services in conjunction with the right to use a related IT asset. 

• Contracts that convey control over the right to use IT software and tangible capital assets and meet the definition of a lease, in which the software component is insignificant. 

• Government entities that grant other entities the right to use their IT software and associated tangible assets through a SBITA. 

• Contracts falling under the scoping criteria for GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. 

• Licensing arrangements that provide the PHA a perpetual license to use a vendor’s computer software, which falls within the scope of GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets.

• Short-term SBITAs: These are contracts with a maximum initial term of 12 months, including renewal or extension options, regardless of their probability of being exercised, similar to GASB Statement No. 87, Leases.

Extracting the Data

The following are key data points needed in order to identify and record your potential SBITA.

• Subscription Term: The length of the subscription term, including extension and termination options, which is: 

  • The period during which a PHA holds a non-cancellable right to use the asset, plus

  • The periods covered by the PHA or SBITA vendor’s option to extend the SBITA if it is reasonably certain, based on all relevant factors, that the PHA or the SBITA vendor will exercise the option, plus

  • The periods covered by the PHA or SBITA vendor’s option to terminate the SBITA if it is reasonably certain, based on all relevant factors, that the PHA or SBITA vendor will not exercise the option 

• Subscription Liability: The total subscription payments to be made over the identified term. 

• Subscription Asset: Payments made before the commencement of the identified term. 

• Subscription Asset: Capitalizable initial implementation costs, less any incentives received at or before the start of the identified term.

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