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Based on input from its Accounting Principles Council, NACUBO recently responded to an Exposure Draft, Subscription-Based Information Technology Arrangements. The proposal defines a subscription-based information technology arrangement (SBITA) as a contract that conveys control of the right to use an SBITA vendor’s hardware, software, or both, including information technology infrastructure (the underlying hardware or software), as specified in the contract for a period of time in an exchange or exchange-like transaction. Cloud computing arrangements would be a type of SBITA.

Under the proposal, the provisions found in Statement No. 87, Leases, would be applied to an SBITA for capitalizing and amortizing a “right to use” asset. In the comments, NACUBO agreed with this concept. NACUBO also supported analogizing to the guidance in Statement No. 51, Accounting and Reporting for Intangible Assets, when evaluating costs for capitalization.

Although “right to use” SBITAs are considered capital assets that are part of a public institution’s “net investment in plant” net position, proposed disclosures would be displayed separately from capital assets. NACUBO suggested that required disclosures be included with either capital assets or leases—because requirements parallel lease information disclosures.

The proposed standard will be effective in FY22 for the vast majority of public institutions with requirements applied retroactively by restating prior years or cumulatively adjusting beginning net position. NACUBO questioned the value of capitalizing previously recognized expenses and instead suggested a prospective application of the proposed guidance.


Sue Menditto

Senior Director, Accounting Policy


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