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Key points

The March 2021 IFRS IC update included an agenda decision on Configuration and Customisation (‘CC’) costs in a cloud computing arrangement. The agenda decision includes steps which entities should consider in accounting for such CC costs. The key areas of consideration are as follows:
  • Can the costs be capitalised as an intangible asset?
  • Can the costs be capitalised as a prepayment, or should the costs be expensed when incurred?
This will impact entities that incur CC costs associated with a Software as a Service (SaaS) cloud arrangement, and might result in a change in accounting policy. Entities should ensure they dedicate sufficient resources to  obtain the historical information about their current and previous SaaS arrangements to implement any change in accounting policy appropriately and on a timely basis.
Table of contents (free registration required to view)
  1. Background
  2. Practical issues
  3. Question 1: Do the CC costs meet the definition of an intangible asset (IAS 38)?
  4. Question 2: Are the CC services distinct from the SaaS arrangement?
  5. Question 3: If the customisation is provided by a third party, is the third party a subcontractor of the SaaS provider?
  6. When does the agenda decision apply?
  7. Customisation and configuration of a cloud computing service: Impacts of the IFRIC agenda decision

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