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Financial Accounting Standards Board (FASB) issued a new Accounting Standard Update (ASU) on April 15 related to cloud computing arrangements.
Aimed at providing explicit guidance about customer’s accounting for fees paid in connection with cloud computing contracts, ASU 2015-05 (Intangibles—Goodwill and Other—Internal-Use Software) explains the key is determining if a software license is included as part of the software contract.
Under ASU 2015-05, when a customer determines there is a software license included in its contract, the software license component should be accounted for consistent with license of other similar intangible assets. If the contract does not include a software license, it is to be accounted for as a service contract.
Entities may adopt the guidance (1) retrospectively or (2) prospectively for arrangements entered into, or materially modified, after the effective date.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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