![]() ![]() FASB proposes guidance on a customer’s accounting for fees paid in a cloud computing arrangement.Published on. 2. 0 Aug 2. here. The FASB issued a proposed ASU1 today that would amend ASC 3. This is now the third proposal released under the FASB’s new simplification initiative, which is intended to reduce the costs and complexity of financial statement preparation. Under current U. S.
GAAP, there is guidance on a vendor’s accounting for fees in a cloud computing arrangement but not on a customer’s accounting. As a result, some diversity in practice has occurred. For example, entities’ views may differ about whether and, if so, when such arrangements are accounted for under ASC 3. ASC 3. 50- 3. 0 (general intangibles), or ASC 3. The proposed ASU would require a customer to perform the same assessment that vendors currently perform under ASC 9. If so, the customer would account for the related fees paid as an internal- use software intangible under ASC 3. The customer would perform the assessment by using criteria that mirror those currently used by a vendor. Thus, the arrangement would contain a software license element if both of the following apply: “The customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty.”4“It is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.”On the basis of its outreach, the FASB concluded that these criteria are widely understood and effective in assessments performed by vendors and that the customer’s assessment should be aligned with the vendor’s. Further, the FASB believes that a customer’s use of specific criteria to determine whether an arrangement is within the scope of ASC 3. The proposed ASU would be effective for public business entities in interim and annual periods beginning after December 1. Early adoption would be permitted for all entities. An entity adopting the proposed ASU could apply it either prospectively to new cloud computing arrangements or retrospectively. The comments on the proposed ASU are due by November 1. Editor’s Note: The proposed ASU provides guidance only on whether a license in a hosting arrangement is within the scope of ASC 3. It does not prescribe how to account for arrangements deemed to be service contracts (i. Accounting For Intangible Assets [IAS 38]. professional fees. Also we may in future sell versions of the license to the software in the future. Since many cloud computing arrangements will not qualify for accounting under ASC 3.For example, entities may question whether analogizing to ASC 3.Some entities may already analogize to the assessment currently required of a vendor under ASC 9.However, those entities may not have applied all elements of ASC 3.For example, they may not have: Separately accounted for all elements under the arrangement (e. Tica Do Ponto De Vista Da Filosofia Contemporanea . ASC 3. 50- 4. 0- 3. Software License TrackingASC 3. 50- 4. 0. Considered the criteria in ASC 8. ASC 3. 50- 4. 0- 2. This could affect the recognition, classification, and presentation of amounts associated with the license throughout the financial statements as well as the pattern of expense recognition (due to accretion of the liability under capital lease accounting).____________________1 FASB Proposed Accounting Standards Update, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. For titles of FASB Accounting Standards Codification references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”3 The proposed ASU states that “[e]xamples of cloud computing arrangements include software as a service, platform as a service, infrastructure as a service, and other similar hosting arrangements.”4 An entity would also consider both potential costs to be incurred and decreases in functionality in determining whether a “significant penalty” is present. FASB Accounting Standards Update No. Revenue From Contracts With Customers, removes the requirement for a vendor to assess these criteria for revenue recognition purposes; however, ASU 2. ASC 9. 85- 2. 0 (i.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |