Term length and amortization
The commitment term drives the prepaid schedule: a prepaid unwinds over the period the committed capacity is consumed, so a three-year deal unwinds over at most three years. An asset the compute helps build follows its own rule. Owned software is amortized over its useful life, which should reflect obsolescence IAS 38-97, and capitalized implementation cost of a hosting arrangement is amortized over the hosting term, including renewals reasonably certain to be exercised ASU 2018-15.
The term sets the ceiling
Keep two schedules apart. The prepaid unwind follows consumption and cannot outlast the committed term. The amortization of anything capitalized follows the asset: a hosting arrangement's implementation cost over the hosting term, owned software over its own useful life, whichever compute contract paid for the build.
Posts to
Primary sources
- [S5] IFRS Foundation: IAS 38 Intangible Assets (IFRS)
- [S7] FASB: ASU 2025-06, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40): Targeted Improvements (issued September 2025; reproduces the amended ASC 350-40 text) (US GAAP)
Ledger current as of 2026-10-23. A position and a citation, not accounting advice. See how we cite.