FASB Improves the Accounting for Costs of Implementing a Cloud Computing
Norwalk, CT, August 29, 2018—The
Financial Accounting Standards Board (FASB) today issued an Accounting Standards
that reduces complexity for the accounting for costs of implementing a cloud
computing service arrangement. The ASU is based on a consensus of the FASB’s
Emerging Issues Task Force (EITF) (Issue No. 17-A).
“Stakeholders observed that existing U.S. Generally Accepted
Accounting Principles (GAAP) resulted in unnecessary complexity and needed to be
updated to reflect emerging transactions in cloud computing arrangements that
are service contracts,” said Russell
G. Golden, FASB Chairman. “To address this diversity in practice, this
standard aligns the accounting for implementation costs of hosting
arrangements—regardless of whether they convey a license to the hosted
The ASU aligns the following requirements for
capitalizing implementation costs:
calendar-year public companies, the changes will be effective for annual
periods, including interim periods within those annual periods, in 2020. For all
other calendar-year companies and organizations, the changes will be effective
for annual periods in 2021, and interim periods in 2022.
- Those incurred in a hosting arrangement that is a service contract
- Those incurred to develop or obtain internal-use software (and hosting
arrangements that include an internal-use software license).
information about the ASU can be found at http://www.fasb.org/.
the Financial Accounting Standards Board
Established in 1973,
the FASB is the independent, private-sector, not-for-profit organization based
in Norwalk, Connecticut, that establishes financial accounting and reporting
standards for public and private companies and not-for-profit organizations that
follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized
by the Securities and Exchange Commission as the designated accounting standard
setter for public companies. FASB standards are recognized as authoritative by
many other organizations, including state Boards of Accountancy and the American
Institute of CPAs (AICPA). The FASB develops and issues financial accounting
standards through a transparent and inclusive process intended to promote
financial reporting that provides useful information to investors and others who
use financial reports. The Financial Accounting Foundation (FAF) supports and
oversees the FASB. For more information, visit http://www.fasb.org/.