Software Accounting | KCTCS

Administrative Procedures

Software Accounting

Procedure Number: 5.3.19-P

Current Effective Date: 07/01/2023

Original Effective Date: 07/01/2023

Revision Dates: 0

Revision Number: 0

Revision Summary: Implementation of new procedure

Responsible Official: Vice President, Administrative Services

References: Administrative Procedure 5.3.10-P

1. Purpose

This procedure provides guidance on accounting for software.

2. Scope

This procedure applies to all business units.

3. General

Sofware may be purchased, leased or developed internally.

  • Software that is purchased or leased is evidenced by an invoice, contract, or agreement with the vendor.

  • Software that is purchased provides ownership rights.
    • Perpetual licenses are a type of purchased software.

  • Software that is leased provides access to use the software.
    • Subscription-based IT arrangements (SBITA) are a type of leased software.
      • A SBITA is an agreement that grants control of the right-to-use software (or control of the right-to-use software and related tangible assets) in exchange for payments for a term that is longer than 12-months, including options to extend.
      • The following are excluded from the definition of a SBITA: perpetual licenses; agreements with variable-only payments; and agreements for services only (e.g., technical support). Variable-only payments means that the payment amount is determined based on activity that varies (e.g., usage).

  • See Administrative Procedure 5.3.10-P for additional procedures related to software purchases and internally developed software.

4. Procedure

To facilitate budgeting, business units process transactions using specific accounts (see Section 5).

To achieve proper accounting and reporting, KCTCS records automated transactions through the Asset Management and Lease Administration modules. KCTCS Accounting monitors account 51061 and records entries, as necessary, to ensure compliance with accounting standards.

5. Software Types and Accounts

Purchased or Internally Developed Leased Software

Transfers ownership or developed internally:

If cost is < $500,000

Use account 51060


If cost is >/= $500,000

Use account 59000

Leased software (including SBITAs):

If cost* is <  $500,000

Use account 51060


If cost* is >/= $500,000

Use account 51061


*When applying the threshold to determine which account to use, calculate the total cost over the life of the agreement.

6. Supporting Documentation

Software transactions must include a copy of the software agreement in addition to other documents such as an invoice, budgetary approval (BA8), etc.