PCC Members Want Consistency on Cloud Computing Guidance

September 28, 2017

With the Financial Accounting Standards Board (“FASB”) continuing to research ways to improve guidance for cloud computing accounting, private organizations and their accountants are pushing for a simplified approach. At a September 19 meeting, Private Company Council (“PCC”) representatives expressed to the FASB their desire for the accounting guidance for implementation costs related to setting up cloud-based business software packages to be consistent with the board’s guidance for similar software licenses.

Beth van Bladel, a PCC member and director of CFO for Hire LLC, argued in favor of cloud computing being treated similarly as software licensing. van Bladel said she preferred that companies decide on how to organize the contractual agreement based on the terms and conditions rather than the accounting treatment. Another PCC member, Timothy Curt of New York-based private equity firm Warburg Pincus LLC, mirrored van Bladel’s sentiment. He said treating cloud computing like a software license would create a more understandable result for organizations.

As mentioned in our September 22 blog, the FASB’s Emerging Issues Task Force (“EITF”) discussed cloud computing accounting at its July meeting. The EITF failed to reach a consensus, as members were split on how to account for implementation costs related to cloud computing arrangements. A follow-up meeting is scheduled for October, when FASB Chairman Russell Golden is expected to review the opinions of PCC members.