SBITA (Subscription-Based Information Technology Arrangements) journal entries With detailed explanation for various scenarios like opening balance, subscription changes and termination during the financial year.
A. Entries for Beginning Balances as of July 1, 2022
Entry 1: Initial Recognition of SBITA Asset and Liability
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 07-01-2022 | GASB SBITA (1684XX) A/c Debit | XXX | |
| 07-01-2022 | To SBITA Obl Capital – Current (219300) A/c | XXX | |
| 07-01-2022 | To SBITA Capitalizable Expense (833200) A/c | XXX |
Explanation:
This entry identifies the opening balance of the SBITA asset and the corresponding current liability and capitalized expense.
Entry 2: Record Fund Balance for SBITA as of July 1, 2022
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 07-01-2022 | GASB SBITA (1684XX) A/c Debit | XXX | |
| 07-01-2022 | To SBITA Obl Capital – Current (219300) | XXX | |
| 07-01-2022 | To SBITA Capitalizable Expense (833200) | XXX | |
| 07-01-2022 | To Fund Balance (3XXXXX) A/c | XXX |
Explanation:
This entry records the opening balance for SBITA assets as of July 1, 2022, including fund balances.
B. Entries During the Fiscal Year
Entry 3: Recognize SBITA Principal and Interest Payments
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2022 | SBITA Interest Expense (818600) A/c Debit | XXX | |
| 12-31-2022 | SBITA Principal Expense (818500) A/c Debit | XXX | |
| 12-31-2022 | To Bank A/c | XXX |
Explanation:
This entry records the interest and principal payments made on subscriptions during the financial year.
Entry 4: Annual Amortization of the SBITA Asset
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2022 | SBITA Amortization (890400) A/c Debit | XXX | |
| 12-31-2022 | To Accumulated Amortization – SBITAs (1684X9) A/c | XXX |
Explanation:
This entry records the annual amortization expense for a right-of-use asset under SBITA.
C. End of Subscription Term
Entry 5: Record the End of Subscription Term
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2025 | SBITA Amortization (890400) A/c Debit | XXX | |
| 12-31-2025 | To Accumulated Amortization – SBITAs (1684X9) A/c | XXX |
Explanation:
This entry recognizes the final amortization of the SBITA asset as the subscription term ends.
D. Subscription Modifications (Decrease in Term/Payments)
Entry 6: Adjustment for Decreased Subscription Term
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2023 | SBITA Obl Capital – Current (219300) A/c Debit | XXX | |
| 12-31-2023 | Gain/Loss – Retire Capital Asset (493300) A/c Debit | XXX | |
| 12-31-2023 | To GASB SBITA (1684XX) A/c | XXX |
Explanation:
This entry records a decrease in the subscription term and adjusts the liability and asset accordingly.
E. Subscription Modifications (Increase in Term/Payments)
Entry 7: Record New SBITA for Additional Term
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2023 | GASB SBITA (1684XX) A/c Debit | XXX | |
| 12-31-2023 | To SBITA Obl Capital – Current (219300) A/c | XXX | |
| 12-31-2023 | To SBITA Capitalizable Expense (833200) A/c | XXX |
Explanation:
This entry records an additional subscription period and related expense.
F. Early or Partial Subscription Termination
Entry 8: Record Early or Partial Termination
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2024 | Accumulated Amortization – SBITAs (1684X9) A/c Debit | XXX | |
| 12-31-2024 | SBITA Obl Capital – Current (219300) A/c Debit | XXX | |
| 12-31-2024 | Gain/Loss – Retire Capital Asset (493300) A/c Debit | XXX | |
| 12-31-2024 | To GASB SBITA (1684XX) A/c | XXX |
Explanation:
This entry records the early termination of the subscription, removes the asset and liability from the books, and recognizes any gain or loss.
These journal entries cover a wide range of possible SBITA scenarios, ensuring accurate accounting for subscription-based IT arrangements.
SBITA stands for Subscription-Based Information Technology Arrangements, introduced under GASB Statement No. 96. SBITA journal entries are used by public sector organizations (such as government bodies) to account for contracts in which they periodically subscribe to IT services rather than own IT assets.
The accounting treatment for SBITA is similar to leases, where the organization recognizes both an intangible right-to-use (RTU) asset and a subscription liability. The liability represents the present value of the payments to be made over the term of the subscription, while the RTU asset is amortized over time.
Key Journal Entries for SBITA:
1. Initial Recognition of SBITA Liability and RTU Asset
When the SBITA agreement begins, the present value of subscription payments is recorded as both a liability and an asset (RTU).
Example: The government entity enters into a 3-year SBITA for $15,000 per year.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-01-2024 | Right-to-Use Asset (SBITA) A/c Debit | 45,000 | |
| 01-01-2024 | To SBITA Liability A/c | 45,000 |
Explanation:
- Right-to-Use Asset (SBITA) will debited because the entity now right to use the IT system under the subscription arrangement.
- SBITA Liability will credited to recognize the liability for future subscription payments.
2. Payment of SBITA Subscription Liability
As the subscription payments are made periodically (e.g., monthly or annually), the liability decreases.
Example: The entity makes its first annual payment of $15,000.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2024 | SBITA Liability A/c Debit | 15,000 | |
| 12-31-2024 | To Bank A/c | 15,000 |
Explanation:
- SBITA Liability will debited to reduce the liability for the first payment made.
- Bank will credited to account for the outflow of funds for the subscription.
3. Amortization of Right-to-Use Asset (SBITA)
The Right-to-Use (RTU) Asset is amortized over the subscription period.
Example: The entity amortizes the asset evenly over the 3-year period.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-31-2024 | Amortization Expense (SBITA) A/c Debit | 15,000 | |
| 12-31-2024 | To Accumulated Amortization (SBITA) A/c | 15,000 |
Explanation:
- Amortization Expense will debited because the right to use the IT system is being used up over time.
- Accumulated Amortization (SBITA) will credited to recognize the reduction in the value of the asset.
Summary of Key Entries
- Initial Recognition of RTU Asset and Liability
- Debit: Right-to-Use Asset (SBITA)
- Credit: SBITA Liability
- Subscription Payment
- Debit: SBITA Liability
- Credit: Bank
- Amortization of RTU Asset
- Debit: Amortization Expense
- Credit: Accumulated Amortization