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Cloud economics: The new cloud accounting mandate
Part of the For Cloud Professionals podcast series
New changes in accounting rules may provide more beneficial accounting treatment for cloud costs. However, there will be challenges in implementation. To more easily navigate the changes, companies may need to put new controls in place and invest in more process automation.
Changes to cloud-cost accounting rules: What you need to know
As of 1 January 2020, new rules for accounting for cloud costs are in place. To make cloud-cost accounting practices more consistent, the Financial Accounting Standards Board (FASB) has implemented guidance that requires companies to capitalize, rather than expense some cloud costs. These changes promise to bring new benefits such as consistency and reduction of complexity, but to also present some challenges for companies on their journey to cloud. In this episode, David Linthicum and guests, Deloitte’s Chris Chiriatti and Sean Torr, discuss the scope of the changes, as well as possible benefits and pitfalls that companies will need to address. The upshot? The changes will likely be positive overall but may require new controls and accounting practices, as well as investments in process automation, to implement correctly.
Ultimately this is going to bring consistency to the way in which we do accounting for companies in terms of cloud-based resources. This is going to reduce the complexity that we're currently going through right now.
Chris Chiriatti is an audit and assurance managing director at Deloitte & Touche LLP.
Sean Torr a managing director with Deloitte Risk & Financial Advisory, which is part of Deloitte & Touche LLP.
Those who are tasked with determining the value of cloud computing have a complex job in front of them. There is a simple way to remember what areas to focus on.
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