GASB 96: Implementation Tips for Tribal Gaming

In May 2020, during the COVID-19 shutdowns, the Governmental Accounting Standards Board (GASB) issued Statement 96, Subscription-Based Information Technology Arrangements (SBITA). Tribal casinos that focused on employee retention, maximizing government funding, and trying to return operations to pre-pandemic levels could have overlooked developing an implementation plan for GASB 96.

There’s still time to act, however; the effective date impacting most Tribal casinos is fiscal year 2023.

The work your Tribe put into the implementation of the lease accounting standard, Statement 87, will support your implementation of GASB 96. Where relevant, GASB 96 is based on the foundation established by the lease standard.

How to Get Started with Implementation

Given the conceptual similarities between these two standards, and the retroactive implementation of GASB 96, now is the perfect time to start the process for implementation.

In addition to the National Indian Gaming Commission regulations, many credit arrangements require comparative financial statements for your Tribal casino to be compliant.

This means you will need to gather your fiscal year 2022 data for that prior year column in your Tribal casino’s financial statements.

What Is SBITA?

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.

GASB 96 does not apply to tribes that provide the right to use their IT software and hardware to other entities through SBITAs, or to licensing arrangements that provide a perpetual license to governments to use a vendor’s computer software meeting the requirements of GASB Statement 51, Accounting and Financial Reporting for Intangible Assets.

Similarities to the Lease Standard

Some of the most significant provisions in GASB 96 are similar to those that you will analyze in the implementation of the lease standard.

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

For Tribal casinos utilizing participation arrangements to lease gaming machines, vendor fees based entirely on performance like net win would generally be excluded from recording the right-to-use subscription asset and liability.

However, if your lease arrangement has fixed fees requirements or daily minimums, in addition to considering the tangible asset under Statement 87, the gaming machine software arrangement would need to be considered under GASB 96.

GASB 96 scopes out short-term SBITAs, which have a maximum possible term under the SBITA contract of 12 months or less, including any options to extend regardless of the likelihood of being exercised.

What to Consider When Analyzing the IT Arrangement

To determine whether a contract conveys control of the right to use underlying IT assets, a Tribal casino should assess whether it has both the right to:

  • Obtain the present service capacity from use of the underlying IT assets as specified in the contract
  • Determine the nature and manner of use of the underlying IT assets as specified in the contract

If a contract meets the SBITA definition, a Tribal casino should record the right-to-use subscription asset—an intangible asset—and a corresponding subscription liability at the present value of payments the entity expects to make during the subscription term. These payments should be adjusted for certain incentives and direct costs as outlined in the standard.

Early Implementation Considerations

GASB 96 is effective for fiscal years beginning after June 15, 2022, which essentially applies to fiscal years ending on or after June 30, 2023. Adoption is retroactively applicable to all periods presented.

Given that the lease standard is likely effective for fiscal year 2022, it could make sense to implement GASB 96 early.

Early implementation might be recommended if your casino is entering into significant new software arrangements that meet the requirements of GASB 96 prior to the implementation date, or you don’t want to go through back-to-back years of retroactive implementation in your Tribal casino’s financial statements.

Consider the relationship of your Tribal casino, be it a fund or component unit of the primary government, and the impact of early adoption throughout the governmental organization. It’s important to know if the primary government is early adopting, as that would require early adoption by all component units.

For additional details on Statement 96, read our article, GASB Issues Guidance on Cloud Computing.

We’re Here to Help

For questions about how these changes might impact your Tribe, please contact your Moss Adams professional.

You can also visit our Tribal & Gaming Practice page for more information.

Contact Us with Questions

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