Capitalization Threshold for Leases and Subscription-Based Information Technology Arrangements (SBITAs)

Policy: 6550

Section: 6000 - Management Support

Montesano School District #66

Capitalization Threshold for Leases and Subscription-Based Information Technology Arrangements (SBITAs)

The Montesano School Board acknowledges that the Governmental Accounting Standards Board (GASB) has issued Statements 87 and 96, covering Leases and Subscription-Based Information Technology Arrangements (SBITAs). Within the guidelines of these Statements, the district may establish a liability threshold for reporting either a lease or a SBITA that are considered to be de minimis when compared to the district’s financial capacity. These leases or SBITAs must have a maximum possible term of greater than one year to be included.

For the purpose of this policy, the following definitions are used, in accordance with the Statements referenced above:

1. A lease is a contract which conveys control of the right to use another entity’s nonfinancial asset for the time specified in the contract for an exchange or exchange-like transaction.
2. A subscription-based information technology arrangement (SBITA) is a contract that conveys the right to use another entity’s software, alone or in combination with tangible capital assets, for the time specified in the contract for an exchange or exchange-like transaction.

The value of leases or SBITAs under this policy will be determined using the methodology outlined in the original Statements and current accepted industry practice.

For capitalization purposes, those leases or SBITAs with total payments that equal or exceed $20,000 and have a maximum possible term in excess of one year will be capitalized and recorded as a liability on the district’s Schedule of Long-Term Liabilities in accordance with the Accounting Manual for School Districts in the State of Washington. Any lease or SBITA that does not meet this threshold, or which has a maximum term of less than one year, will not be reported on the district’s Schedule of Long-Term Liabilities.

Adoption Date: 3/27/2025

Last Revised: December 21, 2023

Classification: Encouraged

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