In a nutshell

Cloud computing arrangements are ones in which a customer does not have possession of the underlying software. Rather, the customer accesses and uses the software on an as-needed basis – for example, over the internet. Cloud computing arrangements are sometimes referred to Software as a Service (SaaS), infrastructure as a service or hosting arrangements.

21RU-005 Cloud computing arrangement costs – Updated discussed how an entity which incurs cloud computing arrangement costs, including implementation costs, may account for those costs – i.e. capitalise or expense.

The IFRS® Interpretations Committee (IFRIC) has issued two final agenda decisions on cloud computing arrangements. The March 2019 decision (PDF 149KB) considers whether a customer receives a software asset at the contract commencement date or a service over the contract term. The April 2021 decision (PDF 160KB)  builds on the 2019 decision and considers how a customer accounts for configuration or customisation costs where an intangible asset is not recognised.

IFRIC agenda decisions are a way of making a statement about why a change of an existing IFRS® Standard requirement or an interpretation of that requirement is not necessary. As a result, final agenda decisions form part of IFRS® guidance. They must be followed in order to claim compliance with IFRS® Standards.

Remember any changes resulting from agenda decisions would be accounted for as a change in accounting policy in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, i.e. it is to be applied retrospectively. Appropriate disclosures of the change are required by IAS 8.

This Reporting Update provides the example disclosures:

  • Where an entity has changed its accounting policy to implement the IFRIC final agenda decisions in its 2021 financial statements – for example, 30 June 2021.
  • Where an entity is unable to adopt the IFRIC final agenda decisions before finalising its 2021 financial statements.

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