Software Accounting
Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) Expenses
UND is required to follow accounting standards that are issued by the Governmental Accounting Standards Board (GASB). Starting in fiscal year 2023, UND had to implement GASB Standard 96 which changed the way that subscription-based information technology arrangements (SBITAs) are reported in UND’s financial statements, requiring that UND record an intangible asset and a liability for SBITAs.
The capitalization of the intangible asset for the SBITA and the recording of the related liability is completed by the UND Controller’s office. This process is similar to the process that is followed for capitalizing major equipment at UND. The Controller’s office also records all amortization expense of the intangible asset and reduces the SBITA liability balance for all SBITA vouchers/invoices that are paid. All the transactions recorded by the UND Controller’s office will not display on financial reports that UND departments generate. The transactions are posted in a ledger that is not included in standard financial reporting.
UND departments are responsible for coding the invoices/vouchers to pay for the various SBITA contracts/agreements that are used across UND. This web page is a resource for UND department to know what account codes to use for the various types of SBITA agreements.
Types of Subscription-Based IT Arrangements (SBITAs)
- SaaS (Software as a Service): This utilizes the internet to deliver applications, which are managed by a third-party
supplier. A majority of SaaS applications run directly through your web browser, which
means they do not require any downloads or installations by the customer/user of the
software.
- Examples: Dropbox, Salesforce, Jaggaer, AssetWorks, TARGETX.COM LLC, Civitas Learning Inc., DocuSign, Epic Electronic Health Records Software, Mathworks, PageUp People Limited, Ringcentral Inc. (Avaya), TIBCO, Watermark Insights LLC
- PaaS (Platform as a Service): This is a cloud infrastructure layer that provides resources to build user-level
tools and applications. It includes the underlying infrastructure including compute,
network, and storage resources as well as development tools, database management systems,
and middleware.
- Examples: Google App Engine, OpenShift, Heroku, Force.com, Windows Azure, AWS Elastic Beanstalk, Apache Stratos, Magento Commerce, AWS Lambda, SAP Cloud
- IaaS (Infrastructure as a Service): This is a cloud computing infrastructure that provides computer, network, and storage
resources over the internet, via a subscription model that can scale.
- Examples: Amazon Web Services (AWS), Google Compute Engine (GCE), IBM Cloud, Microsoft Azure, Rackspace, Linode, Cisco Metacloud, Digital Ocean, Vultr, Oracle Cloud
Common Subscription-Based IT Arrangement Examples:
A department needs to pay an invoice that:
Is related to a subscription-based technology arrangement that will last for:
- 12 months or less OR
- Will have total contract/agreement spend $200,000 or less over the life of the contract.
A department should code payments for invoices identified above to account 531015 (Software/License/Maint Non Cap).
A department needs to pay an invoice that:
- The UND Controller’s office has told the department that the agreement meets the definition of a SBITA and should use the account coding below OR
- The invoice is related to a subscription-based technology arrangement (SBITA), that
will last for:
- Greater than 12 months AND
- Will have total contract/agreement spend of $200,000 or more over the life of the contract.
A department should code payments for invoices identified above to account 531025 (Software/License Capitalized).
For larger SBITA agreements, in addition to the costs associated with the SaaS, PaaS or IaaS, there can also be one-time costs related to the implementation of the software. These costs can be separated into the following three categories:
- Preliminary Project Stage Costs: Costs and activities in this stage include the conceptual formulation and evaluation
of alternatives, the determination of the existence of needed technology, and the
final selection of alternatives for the SBITA.
- Example: An amount paid to a consultant to assist in determining the correct software solution for UND’s software proposal process.
A department should code payments for invoices related to preliminary costs to account 531015 (Software/License/Maint Non Cap).
- Initial Implementation Stage Costs: Costs and activities in this stage include ancillary charges related to designing
the chosen path, such as configuration, coding, testing, and installation associated
with UND’s access to the underlying IT assets. Other ancillary charges necessary to
place the subscription asset into service also should be included in this stage. The
initial implementation stage for the SBITA is completed when the underlying IT asset
is placed into service.
- Example: An amount paid for testing and installation of the subscription.
The UND Controller’s office will capitalize these expenses with the contracted software costs. A department should code payments for invoices related to initial implementation costs to account 531025 (Software/License Capitalized).
- Operation and Additional Implementation Stage Costs: Costs and activities in this stage include maintenance, troubleshooting, and other
activities associated with UND’s ongoing access to the underlying IT assets.
- Example: An amount paid to a supplier for ongoing maintenance of the subscription software.
A department should code payments for invoices related to operation and additional implementation stage costs to account 531015 (Software/License/Maint Non Cap).
Training costs should be expensed to the account 531015 (Software/License/Maint Non Cap), regardless of what stage in which the training costs are incurred.
A department needs to pay an invoice that:
- Is for expenses related to viewing an online publication database. These databases commonly provide electronic access to newspapers, magazines, professional journals, and scholarly articles. This expense is primarily related to having access to the underlying data housed in the database. The software is simply providing access to the underlying data but not serving any additional functionality.
A department should code payments for invoices identified above to account 532121 (Electronic Resrces Non-SBITA).
Common Account Coding Errors
Below is a list of account codes that have commonly been used in prior years to record software-related or online publication database expenses. Please DO NOT use the following account codes to record expenses related to the types of agreements as outlined in scenario #1, scenario #2, or scenario #3 above:
- 532130 Subscriptions Non-SBITA
- 591025 Maintenance Agreements
- 621100 Contract Services
- 621315 Other Operating Fees
- 621325 Other Operating Fees
- 621400 Recharge - Fees
- 623030 Contract Services
- 623155 Other Professional Fees
- 623165 Professional Licensing Fees
- 631010 Other Expenses
Questions
If you have any questions on the information listed above or if you have a specific SaaS, PaaS, or IaaS invoice or contract that you’d like to consult with the UND Controller’s office about please reach out to Jodi Morgan at jodi.morgan@und.edu.