The Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force (“Task Force”) has been ordered to investigate how companies should account for cloud computing services. Announced on May 10, the Task Force must address whether businesses should consider cloud computing setup fees as assets that are amortized throughout the life of the contract, or should the fees be recognized as an expense during the period they are incurred.
The FASB is pushing for clarity on a growing concern among businesses with cloud computing contracts for company-wide applications like enterprise resource planning and customer relationship management. Board member Harold Monk said he would prefer a clear definition pertaining to what is included in the cloud. He also highlighted how expensive it is for companies to move to the cloud, and noted that the issue is becoming more prevalent across companies of all sizes.