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August 29, 2018

FASB amended the Accounting Standards Update that reduces complexity for the accounting for costs of implementing a cloud computing service arrangement. The update is based on a consensus of the Emerging Issues Task Force (Issue No. 17-A) of FASB. The amendments are effective for public business entities for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. For all other entities, the amendments become effective for annual reporting periods beginning after December 15, 2020 and for interim periods within annual periods beginning after December 15, 2021. Early adoption of the amendments is permitted, including adoption in any interim period, for all entities.

The Accounting Standards Update aligns the following requirements for capitalizing implementation costs:

  • Those incurred in a hosting arrangement that is a service contract
  • Those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license)

FASB had initially issued the Accounting Standards Update No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, in April 2015, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license.


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Effective Date: For public companies: 2020 (for annual periods, including interim periods); for other entities: 2021 (annual period) and 2022 (interim periods)

Keywords: Americas, US, Accounting, Cloud Computing Arrangement, Implementation Costs, Accounting Standards Update, FASB

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