- news
- FINANCIAL REPORTING
FASB addresses accounting for implementing certain cloud-computing arrangements
Please note: This item is from our archives and was published in 2018. It is provided for historical reference. The content may be out of date and links may no longer function.
Related
California issues draft guidance for climate risk disclosure
SEC accepting Professional Accounting Fellow applications
Calculating AI’s impact on CPAs: New study quantifies time savings
FASB issued a proposed Accounting Standards Update (ASU) on Thursday that would clarify the accounting for implementation costs related to a cloud-computing arrangement that is a service contract.
The proposal also would add new disclosure rules for implementation costs for internal-use software and cloud-computing arrangements.
In issuing the proposal, FASB is addressing concerns that arose after the board issued ASU No. 2015-05, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Frees Paid in a Cloud Computing Arrangement. That standard was designed to help companies evaluate the accounting for fees paid by a customer in a cloud-computing hosting arrangement. The standard includes guidance for determining when the arrangement includes a software license.
Several stakeholders asked FASB to provide additional guidance on accounting for costs of implementation activities performed in a cloud-computing arrangement that is a service contract. FASB issued the proposal Thursday to address diversity in practice that arose because existing guidance is not explicit in that area.
The proposal would align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred in developing or obtaining internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract would not be affected by the proposal.
Under the proposal, an organization would be required to disclose certain qualitative and quantitative information about implementation costs associated with internal-use software and all hosting arrangements, not just hosting arrangements that are service contracts.
Comments can be submitted at FASB’s website by April 30.
—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.
