Customer accounting for cloud computing

KPMG reports on the EITF’s tentative conclusion on customer accounting for cloud computing arrangements. The EITF reached a tentative conclusion that customers should account for cloud computing arrangements and software licensing arrangements consistently, and directed the FASB staff to perform additional research on the application of the tentative conclusion.

Applicability

EITF Issue No. 17-A

• Companies that are customers in cloud computing arrangements

Relevant dates

• The EITF deliberations are expected to continue at a future EITF meeting

Key impacts

• Customers in cloud computing arrangements would account for implementation costs as though the arrangement contains a software license, regardless of whether it actually does
• Customers in cloud computing arrangements (CCA) would be required to recognize an asset for the right to use the hosted software and a corresponding liability to pay for that asset over time (unless the CCA is prepaid)
• The FASB staff is performing additional research on aspects of applying the EITF’s tentative conclusion

Report contents

• Applicability
• Key facts and impacts
• Current accounting for cloud computing arrangements
• Capitalization of implementation costs
• Accounting for cloud solution fees
• Next steps