Should cloud computing setup costs be expensed or capitalized?

Posted by Kim Chen on July 13th, 2019

Moving to the cloud? Under current accounting rules, when a cloud computing (or hosting) arrangement includes a software license, it’s capitalized over the term of the contract. If not, the setup costs are expensed as incurred. Businesses told the FASB there’s no difference between on-site software applications and those managed in the cloud. So, starting in 2020 for calendar-year public companies and 2021 for private ones, both applications will be capitalized. Contact us to determine whether it makes sense for you to early adopt the new accounting rule.