A shift to cloud computing and its impact on revenue recognition

November 2009
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A shift to cloud computing and its impact on revenue recognition

At a glance

Cloud computing has been a welcomed technology during the economic downturn because of its ability to reduce company cost structures while improving profitability. Now that it’s increased its entry into the market, how will it impact revenue recognition for the companies that embrace it?

During the recent economic downturn, companies began to look for solutions that would help reduce their cost structures and improve profitability. One solution that has emerged is cloud computing. Cloud computing is a different way to consume technology. Now that cloud computing is increasing its penetration, the question is how will it impact revenue recognition for the companies that provide cloud services. Cloud providers will also need to consider the new exposure draft on revenue recognition issued jointly by the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on June 24th, 2010, which, if adopted, could have significant changes to revenue recognition.