Cloud computing arrangements – expense or an asset? | usagoldmines.com

IFRIC’s March 2021 agenda resolution – accounting for configuration and customisation prices in a cloud service contract

In our expertise, most implementation actions might usually be carried out by third events aside from the cloud vendor. The place the implementation companies are supplied by the system vendor, the client assesses whether or not the implementation companies supplied are distinct from entry to software program by making use of the ideas in IFRS 15 Income from Contracts with Clients (IFRS 15).

Implementation companies aren’t distinct

The shopper bills the implementation prices as entry to the software program is acquired, i.e., over the cloud contract time period.

The shopper recognises a prepayment asset for an advance cost in the direction of the implementation prices.

Implementation companies are distinct

When the implementation companies are distinct from entry to the software program, the client assesses whether or not the implementation prices signify an intangible asset in its personal proper that may be capitalised as per IAS 38.

In observe, we might count on administration to carry out a line-by-line evaluation of all implementation prices to find out if any of the prices may be capitalised as an intangible in their very own proper, e.g., customisation, interfaces and bespoke coding that you just management.

If not, expense the implementation prices because the implementation companies are acquired.