Accounting Research Tool

Cloud Computing Arrangements — Implementation Complexities (October 29, 2019)

Accounting Spotlight
October 29, 2019
Image cannot be displayed

Cloud Computing Arrangements — Implementation Complexities


FASB Accounting Standards Update No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract — a consensus of the FASB Emerging Issues Task Force. ASU 2018-15 amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract.
See ASC 350-40-30-4.
If an entity pays fees before go-live that are not related to implementation activities and it does not derive any benefit from those fees, it should consider whether the fees represent a prepaid expense that is recognized as a prepaid asset or expensed as incurred.
Entities are required to allocate costs in hosting arrangements to all individual elements. ASU 2018-15 changed the method of allocation from one that is based on objective evidence of fair value to one that is based on each element’s relative stand-alone price.