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GASB 96 - Cloud Computing for Municipal Utilities - Here are Insights

Russ Hissom's picture
Owner, Utility Accounting Education Specialists -

Russ is the owner of Utility Accounting Education Specialists a firm that provides power utilities consulting services and online/on-demand courses on accounting, finance, FERC best-practices,...

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  • Nov 2, 2021

As municipal utilities move information technology to the cloud, this statement defines the accounting rules

Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-based Information Technology Arrangements, defines the approach and accounting to subscription technology agreements. this GASB 96 Cloud Computing standard will impact your financials with some new rules. 

Effective date

Statement No. 96 is effective for fiscal years beginning after June 15, 2022. Earlier implementation is allowed and encouraged by the GASB.

Summary of GASB Statement No. 96

Current accounting guidance for software accounting for public sector entities is in GASB Statement No. 51 – Accounting and Financial Reporting for Intangible Assets (Issued in 2007). GASB Statement No. 51 details the rules for capitalizing and expensing portions of software projects, recording the capitalized costs as intangible assets that amortized over the software asset's life. But, here comes GASB 69 Cloud Computing.

As the world of software has evolved and more utilities are moving towards "cloud-computing" contracts with software providers, GASB Statement No. 96 addresses these arrangements' complexities.

GASB Statement No. 96 addresses subscription-based information technology arrangements (SBITAs). It defines a SBITA as a contract that conveys control of the right to use another party's information technology software……..for a period of time in an exchange transaction. If this language sounds familiar, it is close to the language used in GASB Statement No. 87 – Leases on the right to use an asset for a period of time.

GASB 96 Cloud Computing states that a SBITA is recorded as an intangible subscription asset and corresponding subscription liability over the term of the SBITA. The statement defines the measurement of the asset and liability as the sum of:

  1. The initial subscription liability amount

  2. Payments made to the SBITA vendor before the subscription term begins

  3. Capitalizable implementation costs (less any discounts or incentives provided by the vendor)

The SBITA is amortized over the period of the subscription agreement.

GASB 96 Cloud Computing


Other tidbits in Statement No. 96

GASB 96 for Cloud Computing also defines costs that should be capitalized, in addition to the subscription costs. The treatment of the project costs follows the "Phased" approach in GASB 51 and include (the bullets below are directly from Statement No. 96):

  • Preliminary Project Stage , including activities such as evaluating alternatives, determining needed technology, and selecting a SBITA vendor. Outlays in this stage should be expensed as incurred.

  • Initial Implementation Stage , including all ancillary charges necessary to place the subscription asset into service. Outlays in this stage generally should be capitalized as an addition to the subscription asset.

  • Operation and Additional Implementation Stage , including activities such as subsequent implementation activities, maintenance, and other activities for a government's ongoing operations related to a SBITA. Outlays in this stage should be expensed as incurred unless they meet specific capitalization criteria.

  • Any SBITAs that are equal to or less than 12 months should be expensed.

GASB states that the nature of the activity should be the determining factor. GASB uses the example that all training costs should be expensed, no matter the stage in which those activities occur.


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Financial statement disclosures

Financial statement disclosures for Statement No. 96 for each SBITA should consist of:

  1. Amount of the subscription asset

  2. Accumulated amortization of the asset

  3. Any other payments not included in the measurement of the subscription liability

  4. Principal and interest requirements for the subscription liability

  5. Length of the SBITA

Practical application for your utility

Your utility undertakes a project to move to a subscription based technology approach for financial software. The specifics of the project are as follows. The account numbers are based on the Federal Energy Commission’s (FERC) Uniform System of Accounts for Electric Utilities :


The SBITA liability is reduced as the annual subscription payments are made.

Using regulatory accounting for recovery of all project costs

Though GASB Statement No. 96 requires expensing all training costs, regulatory accounting under GASB Statement No. 62 – Regulated Operations can be used to recover the training costs over the life of the SBITA is well suited to defer expenses and matching expense recognition to rate recovery.

The regulatory asset is amortized over the 3-year contract period of the SBITA and the annual amortization of $100,000 should be included in customer rates.

Early implementation of Statement No. 96 may fit your business plan

As utilities consider moving their information technology platforms to the cloud, GASB Statement No. 96 details the rules for recording these agreements. If your utility is considering implementing a cloud platform before the official implementation date of June 15, 2022; strongly consider implementing this standard.



Author - Russ Hissom, CPA




About Russ Hissom


Russ is the owner of Utility Accounting Education Specialists. He has over 35 years serving electric investor-owned and public power utilities, electric cooperatives, and telecommunications providers as a past partner in a national public accounting and consulting firm's energy practice. 


Find out more about about Utility Accounting Education Specialists here or you can reach Russ at




The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by UAES. You should seek formal advice on this topic from your accounting advisor.


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