The Financial Accounting Standards Board (FASB) changed a rule in December that will make it harder to capitalize the cost of cloud set-up and implementation expenses, a change that may encourage some enterprises to opt instead for traditional on-premise software.
The FASB Accounting Standards Update to “Intangibles – Goodwill and Other – Internal-use Software (Subtopic 350-40)” addresses “Customer’s accounting for fees paid in a cloud computing arrangement.” And while the update didn’t set out to address how to account for cloud migration costs, the new rules, combined with the FASB’s decision “not to provide additional guidance on the accounting for upfront costs,” will mean enterprise shops can no longer depreciate some fees involved in a cloud migration.
