New Proposed FASB Cloud Computing Regulations

Proposed FASB Cloud Computing RegulationsIn the coming months, new standards and practices may come to fruition that will make working with a cloud vendor easier on your wallet and accountant. How will the new proposed FASB bill make accounting for cloud accounting easier? Learn more from Dallas Provider of Cloud Accounting Trustantial.

Reduced Complexity in Cloud Computing

Proposed by the Financial Accounting Standards Board (FASB), this new proposal plans to simplify the accounting for fees that public, private, and not-for-profit companies pay as customers in cloud-computing arrangements with service providers. Current GAAP rules address the accounting for cloud service providers; but no explicit accounting guidance under GAAP exists regarding how a customer should account for fees paid to the cloud service provider. This lack of guidance can lead to unnecessary cost and complexity during the evaluation of how to account for those fees, as well as diversity in practice. FASB proposes to add guidance to Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software, that would help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement. This proposed legislation would give customers clarity as to whether a cloud-computing arrangement includes a software license:
  • If the cloud-computing arrangement includes a software license, the customer would account for it in a manner consistent with accounting for other software licenses.
  • If no software license is included in the cloud-computing arrangement, the customer would account for the arrangement as a service contract.
Notably, private companies can elect to adopt proposed amendments as of December 15, 2015 and for interim periods beginning after December 15, 2016. The proposed guidance already exists in the Codification in paragraphs 985-605-55-121 through 55-123, but it is included in a Subtopic applied by cloud service providers to determine whether an arrangement includes the sale or license of software. For the full proposal: Click Here To Add Commentary on the issue: Click Here The proposal is part of FASB’s simplification initiative, which aims to find expedited solutions to narrowly focused concerns about U.S. GAAP. The deadline for comments is November 18. As a leader in the cloud accounting industry with a history of tax knowledge, Trustantial has helped small businesses and continues to help growing businesses make the most from their move to the cloud.  Contact us today for more information.

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