What are Subscription-based IT Arrangements?

Subscription-based information technology arrangements (SBITA) is a contract that conveys control of the right to use another party’s IT software, alone or in combination with tangible capital assets, as specified in the contract for a period of time in an exchange or exchange-like transaction.

When will this standard be implemented?

Effective for fiscal years beginning after June 15, 2022.

How to Prepare:

• Consider if there are any existing subscriptions to IT Software or other applications. A few common examples may be a cloud-based IT arrangement or an accounting software that is subscribed to on a monthly or annual basis.
• Consider if there is the existence of an agreement for IT related services.
• Gather any contracts or agreements available for the items identified in steps 1 and 2.
• Determine key elements like:
  • Start and End dates of the agreements or contract
  • Length of the agreement or contract term period
  • Is there an option to terminate early by either party?
  • Are there any additional related costs in addition to the agreed upon rental payment?
  • Is a deposit or down payment required?
• Coordinate with your Auditor to prepare a valuation of the determined SBITAs and prepare necessary journal entries.