Hot Topic | January 2020
Customers’ accounting for cloud computing arrangements
This Hot Topic addresses questions about customers’ accounting for hosting arrangements that are service contracts (i.e. do not contain a software license) after adopting ASU 2018-15.
Applicability
- Customers in hosting arrangements that are service contracts
Relevant dates
Mandatory effective dates and early adoption provisions:
| Effective date: | Public business entities | All other entities |
|---|---|---|
Annual periods – Fiscal years beginning after |
Dec. 15, 2019 |
Dec. 15, 2020 |
Interim periods – In fiscal years beginning after |
Dec. 15, 2019 |
Dec. 15, 2021 |
Early adoption allowed in annual and interim periods? |
Yes |
|
Key impacts
- ASU 2018-15 was issued in August 2018 based on a consensus of the EITF.
- ASU 2018-15 aligns the accounting for implementation costs incurred in a hosting arrangement that does not include a license to internal-use software (a cloud computing arrangement) with one that does.
- ASU 2018-15 requires companies to defer potentially significant implementation costs incurred in a cloud computing arrangement that were often expensed as incurred under legacy US GAAP and recognize them as expense over the term of the arrangement.
- Application questions have arisen about the new guidance.
Report contents
- Applicability
- Background
- Effective dates and transition
- Concepts and definitions
- Questions and answers