Media Advisory 03/01/18

FASB Proposes Improvements to Accounting for Costs of Implementation Activities Performed in Certain Cloud Computing Arrangements

Norwalk, CT, March 1, 2018—The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) that would clarify the accounting for implementation costs related to a cloud computing arrangement that is a service contract. The proposed ASU also would enhance disclosures around implementation costs for internal-use software and cloud computing arrangements. Stakeholders are encouraged to review and provide comment on the proposal by April 30, 2018.

In April 2015, the FASB issued 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, to help companies evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license.

During the comment period and after the issuance of the standard, several stakeholders asked the FASB to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. Because existing guidance is not explicit in that area, the FASB decided to issue this proposed ASU to address the resulting diversity in practice.

The amendments in this proposed ASU would align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract would not be affected by the proposed amendments.

The amendments in this proposed ASU also would require an organization to disclose certain qualitative and quantitative information about implementation costs associated with internal-use software and all hosting arrangements, not just hosting arrangements that are service contracts.

More information about the proposed ASU is available at

About the Financial Accounting Standards Board

Established in 1973, the FASB is the independent, private-sector, not-for-profit 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