Social Capital Theory and Research - PDF
Added on 2021-05-30
8 Pages1929 Words101 Views
Running head: EXPOSURE DRAFT 1EXPOSURE DRAFTExposure Draft: Proposed Accounting Standards Update, Intangibles-Goodwill and Other-Internal-UseSoftware (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in aCloud Computing Arrangement That Is a Service Contract; Disclosures for ImplementationCosts Incurred for Internal Use Software and Cloud Computing Arrangements.IntroductionThe aim of this exposure draft is to help institutions evaluate the accounting for fees paidby a customer in a cloud computing arrangement by providing guidance for determining whenthe arrangement includes a software license. If a cloud computing includes a license to internal-use software license, then the software license is accounted for by the customer. This basicallymeans that an intangible asset is recognized for the software license. Also, the extent that thepayments attributable to the software license are made over time, a liability is recognized. If acloud computing arrangement does not include a software license, then the entity should accountfor the arrangement as a service contract. This generally means that the fees associated with thehosting element (service) of the arrangement are expensed as incurred. (Dubos, 2017)Is it introduced to the ‘public Interest?’Yes, it is. The amendment aligns the requirements for capitalizing implementation costsobtained in a hosting arrangement that is a service contract with the requirements for capitalizingimplementation costs incurred to develop or obtain internal-use software. Thus, a customer isaware of the costs needed for their service contract. Also, the amendment requires a customer tofollow the guidance in Subtopic 350-40 on internal-use software to know which costs to employthe service contract and which costs will be expensed. Thus a customer has a guide on internal-
use software and thus is knowledgeable on the area. Finally, the amendment requires a customerto expense the capitalized implementation cost of a hosting arrangement and the term of thehosting arrangement. This way the customer is able to account for his or her money withoutpressure from anyone (Friedman, 2017). By paying for the capitalized implementation, he or sheagrees with the service contract and is satisfied with it and confident that the money is a goodinvestment.COMMENT LETTERS1. By Western Digital CorporationIn this comment letter the views presented are: We are currently undergoing a complexcloud enterprise resource planning (ERP) system implementation. The nature, type, and structureof this cloud system are the same as those that were addressed in ASC 350-40 for internal usesoftware. These cloud ERP systems are complex and for this reasons, we support the ability toapply the guidance of the ASC 350-40 and to capitalize on relevant costs such as those paid tothe third party implementer that is not a cloud host provider. In addition, we are upgrading andimplementing on internal software and the proposed ASU will eliminate any complexities thatcome. Also, we agree with ASU in transferring the license to the customer thus they are able toexpense for the implementation costs incurred in the internal-use software arrangements (Grunig,2017)This comment letter is for the regulation as evident below: For example, the comment“We believe that it would be appropriate to capitalize certain implementation costs incurred incloud computing arrangements during the application development phase, as those costs incurreddo not provide a one-time benefit at implementation. Rather, the costs incurred to benefit theentity throughout the term of the arrangement, thereby, providing better matching of expenses
with the period of benefit through recognition in profit or loss over the term of the arrangement.”The Western Digital Corporation agrees with the amendment in letting the customer incur thecosts because they believe this benefits the customer throughout the term of the contract.The comment letter is also against the regulation as evident below. They do not fullyagree with the amendment in terms of licensing since it does not address contracts that have aminor hosting element. For example, the comment’ the revised definition eliminates confusion asto whether or not hosting arrangements (that do not contain a software license) is in scope forASC 350-40. However, we believe the proposed amendments to the definition of a hostingarrangement could be further modified to address contracts that have a minor hosting element. ‘2. By The California Society of CPA's (CalCPA)The views presented are: The CalCPA Committee agrees with the proposed accountingand believes it will result in reasonably consistent accounting for arrangements that are similar.The committee also believes that the guidance in Subtopic 350-40 for determining the projectstage can be constantly applied to a hosting arrangement. The committee believes that acustomer should apply an impairment model to implementation costs of a hosting arrangementthat is a service contract as stated in Subtopic 350-40.The comment letter is for the regulation as presented below: For example the comment‘the Committee believes that the amended definition of a hosting arrangement and theapplication of existing GAAP are sufficient to determine if arrangements meet the scope of thisproposed ASU.’ In this comment, CalCPA believes that the guidance given in the draft issufficient to determine arrangements even minor therefore no more guidance required.3. By Apple Inc.
End of preview
Want to access all the pages? Upload your documents or become a member.