Industry Insights

A Closer Look at Software Hosting Arrangements

November 2015

The recently issued Accounting Standards Update (ASU) related to Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software, has led financial statement preparers to review their cloud computing arrangements in search of a software license. ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, provides guidance to customers about whether the newly defined hosting arrangement includes a software license. Let’s look at the key concepts of the accounting guidance and the importance of reviewing software hosting arrangements in light of the new accounting requirements.

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