The Financial Accounting Standards Board has issued a draft proposal allowing companies to capitalize certain implementation costs relating to new systems that operate on cloud technology, an issue that was first raised to FASB by members of the American Bankers Association’s Accounting Administrative Committee. Comments on the draft proposal will be accepted until April 30.
Banks and other companies incur significant costs when developing interfaces related to third-party software, including cloud-based solutions. Under current accounting practices, these costs are directly expensed, whereas similar costs incurred for certain internal-use software are allowed to be capitalized and amortized over the life of the licensing agreement. The proposed change would provide consistency by allowing banks the option to capitalize and amortize certain costs regardless of the type of software solution being implemented. For more information, conatct ABA’s Josh Stein.