Resources

Thomson Reuters Tax & Accounting News

Featuring content from Checkpoint

Back to Thomson Reuters Tax & Accounting News

Subscribe below to the Checkpoint Daily Newsstand Email Newsletter

Final Amendments Approved for Reporting Cloud Computing Fees

The FASB agreed to amend U.S. GAAP to clarify how cloud computing clients report fees they pay to suppliers. Cloud computing customers are expected to use the amended guidance to determine whether they have a license to use the software or a service contract.

The FASB agreed on February 18, 2015, to finalize amendments to U.S. GAAP to clarify how cloud computing clients report fees they pay to suppliers.

A draft of the amendments was published in August in Proposed Accounting Standards Update (ASU) No. 2014-230, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.

With the amendments, the FASB is addressing an issue that had been overlooked in U.S. GAAP, which hadn’t explained how customers should report cloud-computing fees. For some financial professionals, the lack of a clear standard made reporting the fees complicated and costly. Some professionals told the FASB that the lack of a standard led to inconsistent reporting of the fees.

Some companies treat the purchases of cloud computing services as software licenses, although more typically the agreements are treated as service contracts.

The amendments are intended to help customers determine whether a cloud computing contract is a software license, which was one of the chief concerns FASB members had when they debated the issue. In the FASB’s view, the more stringent criteria should establish more consistency in financial reporting by cloud computing clients.

Tagged with →