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FASB issues ASU to simplify accounting for cloud computing fees paid by customers

  • FASB document Image

Apr 16, 2015

The FASB has issued Accounting Standards Update (ASU) No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” as part of its simplification initiative. The ASU amends ASC 350-40 to provide customers with guidance on whether a cloud computing arrangement contains a software license to be accounted for as internal-use software.

The ASU requires customers to perform the same assessment that vendors currently perform under ASC 985-605; that is, customers must determine whether an arrangement contains a software license element. If so, the related fees paid are accounted for as an internal-use software intangible under ASC 350-40; if not, the arrangement is accounted for as a service contract.

For public business entities, the ASU is effective for interim and annual periods beginning after December 15, 2015. For all other entities, the ASU is effective for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 15, 2016. Early application is permitted for all entities. An entity adopting the ASU may apply it either prospectively to new cloud computing arrangements or retrospectively.

For more information, see Deloitte's related Heads Up newsletter, as well as the ASU on the FASB’s Web site.

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