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Cloud Computing Accounting Services

Implementation of ASU 2018-15

The transition period for ASU 2018-15, customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract, has already begun. Even those companies that have more time need to start planning for the cloud computing standard implementation.

Getting started with ASU 2018-15 implementation

ASU 2018-15 addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. The new guidance is effective for public business entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

Given these timelines, companies need to be nailing down their approaches to the cloud computing accounting standard as soon as possible.

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Addressing the challenges of your ASU 2018-15 implementation

Entities undertaking the cloud computing standard implementation may face a number of hurdles.

Non-linear implementation phases and lack of transparency

  • CCA project phases may not consistently occur in a linear fashion (e.g., training could occur in parallel with application development).
  • The nature of cost information from vendors may be unclear, requiring management judgment for allocation.
  • Identification, tracking, and significant management judgment on the allocation of internal costs may be called for.
  • Organizations with large projects and multiple vendors may not currently track costs on a project-by-project basis for each vendor, resulting in ambiguity with respect to the project phase in which costs are incurred.

Hosting arrangement term

  • Reasonably certain renewal and termination options are included in the period over which deferred implementation costs are amortized and require judgment and periodic reassessment.
  • A number of factors impact the determination of whether to include optional periods in the term (e.g., obsolescence, technology, competition, economic conditions).

Hosting arrangements with multiple modules or components

  • Each module or component should be considered separately unless the functionality of the module depends on the completion of other modules.
  • Identification and differentiation of activities related to internal-use software and implementing a CCA are important due to differences in classification of costs incurred in a CCA that is a service contract (prepaid assets, operating expenses, and operating cash flows) and an internal-use software license (intangible assets, amortization expenses, and investing cash flows).
  • Amortization of capitalized costs may differ depending on whether a module or component is ready for its intended use and does not depend on the completion modules or components.


  • It may be necessary to establish an appropriate monitoring and control structure for:
    • Data capturing and required documentation
    • Completeness of contracts
    • Appropriate internal cost allocation methodology (e.g., payroll and related expenses)

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How Deloitte can help with your ASU 2018-15 implementation

Deloitte has developed a methodology to assist organizations as they transition to the new cloud computing accounting standard. This includes helping with the following activities:

  • Provide observations, advice, and recommendations related to current CCA costing methodology and potential compliance challenges
  • Identify and review sample contracts related to in-process CCA projects and assess the impact of the CCA for each
  • Design and build a template for on-going CCA reviews
  • Develop a transition approach including policy elections (for example, retrospective or prospective transition method)
  • Guide development of a roadmap and work plan for adoption
  • Create a high-level preliminary estimate of the impact on financial statements based on the sample contracts reviewed
  • Identify other implications such as financial reporting disclosures, income tax, and budgeting
  • Draft technical accounting memos and provide educational guidance to staff regarding the transition
  • Design and development of internal controls

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Get in touch

Sean Torr
Managing director

Deloitte Risk & Financial Advisory
Deloitte & Touche LLP

Chris Chiriatti
Managing director

Audit & Assurance
Deloitte & Touche LLP

Matt Hurley
Senior manager

Deloitte Risk & Financial Advisory
Deloitte & Touche LLP

Paul Pochmara

Deloitte Risk & Financial Advisory
Deloitte & Touche LLP

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