Mechanics
Service contract vs software license
The posting
The cloud computing arrangement test asks whether you control the software or merely receive a service. If you do not obtain the right to take possession and run the software, it is a service contract: the fee is expensed and only distinct implementation costs may be capitalized under ASU 2018-15. Under IFRS the IFRIC March 2021 decision generally expenses configuration IFRIC 2021.
Why the outcome changes the posting
A license gives you an asset you control, potentially recognized as acquired software. A service contract gives you access, expensed as received. The same rented-model spend can therefore sit on very different lines depending on which side of this test it falls.
Posts to
Primary sources
- [S2] KPMG: Cloud computing implementation costs post ASU 2018-15 (US GAAP)
- [S6] IFRS Interpretations Committee: Configuration or customisation costs in a cloud computing arrangement (IAS 38) agenda decision, March 2021 (IFRS)
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.