New FAQ on How does an entity account for “software as a service” in a cloud computing arrangement?

Cloud computing arrangements with “software as a service” are understood as arrangements in which the entity contracts to pay a fee in exchange for a right to receive access to a supplier’s application software for a specified term. The supplier’s software runs on cloud infrastructure managed and controlled by the supplier. The FAQ considers whether an entity acquires a software asset when entering into the contract, with reference to whether the entity has either (a) entered into a finance lease agreement, or (b) obtained control of the software asset.

The FAQ concludes that an entity may recognise a software asset in rare circumstances, as it is difficult to demonstrate that a right to access the supplier’s software gives the entity control of the software itself.

Access the FAQ here.