Will new accounting rule slow adoption of cloud computing?

Grazed from NetworkWorld. Author: John Dix.

The Financial Accounting Standards Board (FASB) changed a rule in December that will make it harder to capitalize the cost of cloud set-up and implementations expenses, a change that may encourage some enterprises to opt instead for traditional on-premise software.

The FASB Accounting Standards Update to “Intangibles – Goodwill and Other – Internal-use Software (Subtopic 350-40)” addresses “Customer’s accounting for fees paid in a cloud computing arrangement.” And while the update didn’t set out to address how to account for cloud migration costs, the new rules, combined with the FASB’s decision “not to provide additional guidance on the accounting for upfront costs,” will mean enterprise shops can no longer depreciate some fees involved in a cloud migration…

Hugo Vasquez, Deputy CIO and VP of Technology and Services for AES, a Fortune 200 global power company, said prior to the change his company was able to capitalize the cost of a cloud migration project and write off that investment over three years. “Now with the new rules, the project itself cannot be capitalized,” Vasquez says…

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