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The Governmental Accounting Standards Board (GASB) has issued an exposure draft (ED), Implementation Guidance Update-2023, that adds nine new questions and answers (Q&A), and one amendment to an existing Q&A. The areas covered are leases, subscription-based information technology arrangements (SBITA), and accounting changes. NACUBO submitted a comment letter requesting changes to one of the Q&A items.

Question 4.7 of the ED addresses a software licensing agreement that automatically renews until cancelled. The proposed guidance states that such an agreement is not considered to be a perpetual license; rather, it is considered to be a SBITA.

NACUBO expressed concern that GASB’s answer leaves open the question of whether the renewal periods should be included in the subscription term. We suggested that the question be modified to indicate that both the government and the vendor must have an option to terminate the SBITA at each renewal date and provide a reference to the applicable paragraph of the final standard.

In addition, the comment letter suggests that the answer to Question 4.7 be modified to include a reference to the paragraph of the final standard that provides guidance on the factors to consider when determining the likelihood that the renewal option will be exercised.


Chris Leach

Accounting Policy Analyst


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