Tuesday, April 21, 2015

Good News, Everybody! (well, bean-counters) SAAS is Deductible!

The Financial Accounting Standards Board (FASB) released an accounting standards update, which covers the fees paid for cloud computing. This is part of FASB's simplification initiative aimed at eliminating unnecessary complexity in accounting standards. In the first update, “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,” FASB noted that existing GAAP does not include explicit guidance about a customer’s accounting for fees paid in a cloud computing arrangement. These can include software as a service, platform as a service, infrastructure as a service, and other similar hosting arrangements. FASB said it heard from stakeholders that the absence of explicit guidance resulted in some diversity in practice, along with unnecessary costs and complexity, in evaluating the accounting for those fees.

The guidance already exists in the FASB Accounting Standards Codification, but it's included in a subtopic applied by cloud service providers to determine whether an arrangement includes the sale or license of software. The amendments in the latest update provide guidance to customers about whether a cloud computing arrangement includes a software license.

If a cloud computing arrangement includes a software license, then FASB said the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change generally accepted accounting practices GAAP for a customer’s accounting for service contracts.

Read more at... Accounting Today!

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