By Ken Tysiac

FASB issued a proposed Accounting Standards Update 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): Customeŕs 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.

Continue reading at Journal for Accountancy

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