For example, this requirement would apply to Tribal casinos, which must prepare comparative financial statements to comply with National Indian Gaming Commission (NIGC) regulations.
Given the amount of data necessary to identify and measure lease obligations, it’s important to start preparing now. Tribal entities can begin by performing an inventory of lease-type arrangements to identify all contracts that might qualify as a lease under the new guidance.
Several items are scoped out of Statement 87, including:
- Leases of biological assets, such as timber, living plants, and animals
- Leases based on future performance
- Leases of intangible assets, including natural resources and software
Consequently, Statement 87 isn’t applicable to certain arrangements common to Tribal gaming facilities, such as:
- Gaming machine software arrangements
- Other contracts with fees based on performance, such as participation—revenue sharing—agreements and outsourced food and beverage contracts
However, the pending SBITA standard described below will require consideration of all software lease arrangements, except for those with fees based on performance.
For additional details on Statement 87, its potential implications for Tribal entities, and implementation best practices, refer to our article, How Tribes Can Prepare for the New Lease Accounting Standard.
You can also reference the GASB’s May 2021 guide, Implementation Guide No. 2021-1, which includes questions and answers related to implementing Statement 87.
GASB Statement 96, Subscription-Based Information Technology Arrangements
GASB Statement 96, Subscription-Based Information Technology Arrangements, defines an SBITA as 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.
Provisions Covered in the SBITA Standard
Many of the accounting provisions in Statement 96 are similar to those in Statement 87. These include provisions related to determining and recording:
- Length of the contract
- Measurements for recording intangible assets and liabilities
- Bifurcation of contracts containing multiple components
Like Statement 87, Statement 96 also scopes out arrangements with fees based on performance, a relevant consideration for Tribal gaming facilities with gaming machine participation arrangements.