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Task Force to Release Consensus-for-Exposure on Cloud Computing Implementation Costs

Emerging Issues Task Force (“EITF”) members plan to release a consensus-for-exposure concerning EITF Issue No. 17-A, “Customer’s Accounting for Implementation, Setup, and Other Upfront Costs (Implementation Costs) Incurred in a Cloud Computing Arrangement That Is Considered a Service Contract.” The consensus-for-exposure is likely to address income statement alignment of implementation costs expensed with other expenses related to a cloud computing contract.

The EITF has yet to announce whether the changes from Issue 17-A can be applied via analogy to contracts outside of the project’s scope. Such contracts include those that allow the use of intangible assets.

In related news, the EITF has discussed the potential disclosure requirements of implementation costs associated with cloud computing arrangements. Most EITF members believe such disclosures related to cloud computing contracts should be aligned with the disclosures of software arrangements.

Additionally, members will allow companies to select either a prospective or retrospective transition. This approach aligns with the transition requirements under Accounting Standards Update No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, by the Financial Accounting Standards Board.

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