ASU 2018-15 Cloud Computing Arrangements
ASU 2018-15 addresses a hosting arrangement that is a service contract, where the customer does not control the underlying software. It allows the implementation costs of that arrangement to be capitalised on the same model as internal-use software and expensed over the contract termS4. The service fees themselves remain period costs.
Service contract versus a software licence
The first test is whether the arrangement includes a software licence the customer controls, or only a right to receive a service. If it is a service contract, the customer does not recognise a software asset for the platform itself; it pays for a service ASU 2018-15350-40-15. Most hosted AI tooling and managed model endpoints are service contracts.
Implementation costs follow the internal-use model
ASU 2018-15 aligns the accounting for implementation activities of a service-contract CCA with the internal-use software guidance in ASC 350-40. Costs in the application-development phase of implementation, such as configuration and integration, may be capitalised; preliminary and post-implementation costs are expensed ASC 350-40350-40-25.
Service fees → EXPENSEQualifying implementation → CAPITALISE
Amortisation over the term
A capitalised implementation asset is amortised over the term of the hosting arrangement, including reasonably certain renewals, rather than an independent useful life S4. This ties the deferred cost to the service it enables and prevents an implementation asset outliving the contract.
- S4FASB Accounting Standards Codification, PwC Viewpoint (US GAAP). https://viewpoint.pwc.com/dt/us/en/fasb/GAAP/Codification/Codification/228073.html
- S5ASU 2025-06 on internal-use software costs, BDO (US GAAP). https://arch.bdo.com/new-asu-on-internal-use-software-costs-guidance