New Developments Summary: Costs of implementation in a hosting arrangement

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The FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force), to address how a customer should account for the costs of implementing a cloud computing service arrangement, or a “hosting arrangement.”

According to the update, entities should account for costs associated with implementing a cloud computing arrangement that is considered a service contract in the same way as accounting for implementation costs incurred to develop or obtain software for internal use using the guidance in ASC 350-40. The amendments address when costs should be capitalized rather than expensed, the term to use when amortizing capitalized costs, and how to evaluate the unamortized portion of these capitalized implementation costs for impairment.

Our New Development Summary explores the new ASU’s provisions, including the dates public business entities should apply the amendments. 

Julia Siegfriedt-Wilson
Accounting Principles Group
T +1 312 602 8219