The FASB issued a final standard in April 2015 on a customer’s accounting for fees paid in a cloud computing arrangement. The standard provides guidance on how customers should evaluate whether such arrangements contain a software license that should be accounted for separately. Customers will need to apply the same criteria as vendors to determine whether the arrangement contains a software license or is solely a service contract. The new standard will affect all entities that apply U.S. GAAP and purchase cloud, software-as-a-service, or other hosted computing arrangements, irrespective of industry.
The standard is effective for public companies for annual periods, including interim periods, beginning after December 15, 2015. For non-public companies, it is effective for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 15, 2016. Early adoption is permitted for all companies.
This In depth discusses the key provisions in the final standard.
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