News Release 08/29/18
FASB Improves the Accounting for Costs
of Implementing a Cloud Computing Service Arrangement
Norwalk, CT, August 29, 2018—The Financial Accounting Standards Board (FASB) today issued an Accounting Standards Update (ASU) 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 software.”
The ASU aligns the following requirements for capitalizing implementation costs:
- 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).
More information about the ASU can be found at www.fasb.org.
About 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 www.fasb.org.