Add to favorites
As companies move their data, applications, and platforms to the cloud, software that a customer would have traditionally installed locally on its own servers is now often hosted on a vendor’s (or a third-party cloud platform provider’s) servers and accessed by the customer remotely. These arrangements are sometimes referred to as hosting arrangements or cloud computing arrangements (CCAs). Examples of CCAs include software as a service and other “as a service” arrangements, including platform as a service and infrastructure as a service. Some CCAs transfer a license to the software in addition to the service of hosting the software. The assessment of whether a CCA includes a license is discussed in SW 1.5.
A reporting entity that purchases services through a CCA provided by a third-party vendor may be entering into an arrangement that is solely a service contract. Although the reporting entity is not acquiring software in this situation, the determination of whether to capitalize the related implementation costs is based on the internal-use software guidance in ASC 340-40, as further discussed in this chapter. The same model is used because the types of activities and the nature of the costs to implement on-premises software and a CCA can be similar. However, presentation of costs related to a software license and a CCA that is a service will differ. In essence, purchasing a software asset is an investment in a long-lived asset; purchasing services through a CCA is an operating expense. These presentation differences are discussed in detail in FSP 8.7.
A reporting entity that is the vendor providing a CCA to customers will need to assess whether the arrangement includes a license (i.e., whether the software is transferred to the customer) to determine which guidance to apply to the related software development costs. The scoping considerations and accounting implications for vendors providing a CCA are discussed in SW 1.5.2.

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide