Administrative Procedures

Software Accounting

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