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Deloitte comment letter on tentative agenda decision on IAS 38 — Customer’s right to access the supplier’s software hosted on the cloud

Published on: 07 Mar 2019

We have commented on the IFRS Interpretations Committee's publication in the November 2018 IFRIC Update of the tentative decision not to take onto the Committee's agenda the request for clarification on how a customer in a ‘Software as a Service’ cloud computing arrangement.

We disagree with the IFRS Interpretations Committee’s decision not to add this item onto its agenda. We note that the agenda decision suggests that all licencing agreements are out of the scope of IFRS 16. We believe that this conclusion is an interpretation of the requirements of IFRS 16.3(e) and of IAS 38.6. A reasonable acceptable alternative interpretation of those paragraphs is that the reference to “rights held by a lessee under licensing agreements for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights” is that only leases of licensing agreements for items similar to motion pictures films, video recordings, plays, manuscripts, patents and copyrights are necessarily within the scope of IAS 38. Under this alternative interpretation, leases of licensing agreements for other items (in particular, software) may be accounted for either under IFRS 16 or IAS 38 as permitted by IFRS 16.4. We believe that this alternative interpretation is commonly applied in practice. If the scope of contracts excluded from IFRS 16 by paragraph 3(e) is to be interpreted more broadly, this would need to be confirmed by an IFRIC Interpretation.

Download the full comment letter below.


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