Cloud Computing – AcSB

Date recorded:

At its meeting on January 19-20, 2022, the AcSB continued discussing the proposed Accounting Guideline. The Board discussed some wording clarifications to its proposals, including the following: (a) for expenditures on implementation activities that are capitalized using the proposed accounting policy choice when the cloud computing arrangement is a software service, clarify the period over which such expenditures shall be expensed. The Board discussed various factors an enterprise should consider when determining this period; and (b) clarify that when an enterprise applies the simplification approach, it is permitted to expense all intangible elements in a cloud computing arrangement, irrespective of the enterprise’s existing accounting policy for expenditures on internally generated intangible assets. The AcSB also discussed the illustrative examples in the proposed Accounting Guideline. The Board decided to use one fact pattern illustrating the application of the Accounting Guideline when an enterprise: (i) chooses to apply the simplification approach to expense as incurred all intangible elements in a cloud computing arrangement; and (ii) chooses not to apply the simplification approach and, instead, chooses to capitalize qualifying expenditures on implementation activities when the arrangement is a software service. The AcSB will review a revised draft of the proposed Accounting Guideline and other information in an exposure draft based on its comments. The Board plans to issue an exposure draft in the first quarter of 2022, with a 90-day comment period.

Review the Executive Summary on the AcSB's Web site.

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