Changes Proposed to Accounting for Implementation Costs of Specific Cloud Computing Arrangements

March 21, 2018

A proposed Accounting Standards Update (“ASU”) intends to clarify how companies should account for implementation costs associated with cloud computing arrangements that are service contracts. Issued by the Financial Accounting Standards Board (“FASB”), the proposed ASU would improve disclosures concerning implementation costs for internal-use software and cloud computing arrangements.

The FASB issued the proposal in response to feedback regarding ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU No. 2015-05 provides guidance to companies for determining when a cloud computing arrangement has a software license. Stakeholders requested more guidance on how to account for costs of implementation activities done in a cloud computing arrangement that is a service contract. As a result, the FASB issued the proposal to address diversity in practice.

Comments on the proposed ASU are due Monday, April 30.