Defining Issues 
| August 2018

FASB issues ASU on accounting for implementation costs of cloud computing arrangements

Filed under: Assets, Expenses
KPMG reports on the FASB’s new ASU on customers’ accounting for implementation costs in cloud computing arrangements (CCAs) based on a consensus of the FASB’s Emerging Issues Task Force (EITF). Under the new guidance, implementation costs incurred by customers in CCAs are deferred if they would be capitalized by customers in software licensing arrangements under the internal-use software guidance.


ASU 2018-15

  • All companies that are customers in cloud computing arrangements (i.e. ‘hosting arrangements’ that do not transfer a software license to the customer)

Relevant dates

Mandatory effective dates and early adoption provisions:

Effective date:

Public business entities

All other entities

Annual periods – Fiscal years beginning after

December 15, 2019

December 15, 2020

Interim periods – In fiscal years beginning after

December 15, 2019

December 15, 2021

Early adoption allowed?

Yes, for all companies.

Yes, for all companies.

Key impacts

  • Implementation costs related to a cloud computing arrangement (CCA) will be (1) deferred or (2) expensed as incurred, in accordance with the existing internal-use software guidance for similar costs
  • The ASU requires companies to recognize the implementation costs as expense over the noncancellable term of the CCA plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider
  • The balance sheet, income statement and cash flow presentation for deferred implementation costs will be consistent with the subscription fees associated with the CCA

Report contents

  • Applicability
  • Key facts and impacts
  • Current guidance
  • Deferral of implementation costs
  • Disclosure requirements
  • Effective date
  • Transition



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