ABA Supports FASB Proposal Allowing Banks to Capitalize New Cloud System Costs

In a comment letter to the Financial Accounting Standards Board today, the American Bankers Association offered support for a proposal that would allow companies to capitalize certain implementation costs relating to new systems that operate on cloud technology. Under current accounting practices, depending on the classification of the contract with the software provider, banks may be required to directly expense the associated costs. The proposal would provide consistency by allowing banks to capitalize and amortize costs regardless of the classification of the related contract.

As FASB works to finalize the proposal, ABA urged the board to consider including provisions that would allow banks to make an independent assessment when determining the useful life of an asset; provide transition flexibility and an option for early adoption; and apply the standard broadly to similar transactions beyond hosting arrangements. The association also supported a separate initiative to reassess the current accounting standards around internal use software.