Market Overview

FASB Improves the Accounting for Costs of Implementing a Cloud Computing Service Arrangement


The Financial Accounting Standards Board (FASB)
today issued an Accounting Standards Update (ASU)
that reduces complexity for the accounting for costs of implementing a
cloud computing service arrangement. The ASU is based on a consensus of
the FASB's
Emerging Issues Task Force
(EITF) (Issue No. 17-A).

"Stakeholders observed that existing U.S. Generally Accepted Accounting
Principles (GAAP) resulted in unnecessary complexity and needed to be
updated to reflect emerging transactions in cloud computing arrangements
that are service contracts," said Russell
G. Golden, FASB Chairman
. "To address this diversity in practice,
this standard aligns the accounting for implementation costs of hosting
arrangements—regardless of whether they convey a license to the hosted

The ASU 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).

For calendar-year public companies, the changes will be effective for
annual periods, including interim periods within those annual periods,
in 2020. For all other calendar-year companies and organizations, the
changes will be effective for annual periods in 2021, and interim
periods in 2022.

More information about the ASU can be found at

About the Financial Accounting Standards Board

Established in 1973, the FASB is the independent, private-sector
organization, based in Norwalk, Connecticut, that establishes financial
accounting and reporting standards for public and private companies and
not-for-profit organizations that follow Generally Accepted Accounting
Principles (GAAP). The FASB is recognized by the Securities and Exchange
Commission as the designated accounting standard setter for public
companies. FASB standards are recognized as authoritative by many other
organizations, including state Boards of Accountancy and the American
Institute of CPAs (AICPA). The FASB develops and issues financial
accounting standards through a transparent and inclusive process
intended to promote financial reporting that provides useful information
to investors and others who use financial reports. The Financial
Accounting Foundation (FAF) supports and oversees the FASB. For more
information, visit

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