A three-year cloud contract can contain a recurring service fee, configuration, custom code, data conversion, training, and support. One invoice does not make those activities one asset. First determine—or preserve as a supplied fact— whether the arrangement contains a software license or is a service contract.
For a service contract, qualifying implementation costs take their own deferral and expense path associated with the hosting term. Subscription fees remain service costs; training and conversion do not become software because a vendor calls the project an implementation. Vendor performance and ownership of custom code can change the analysis and must stay in the contract file.
Presentation should preserve the hosting-service identity. A deferred cost is not evidence that the customer controls the hosted software.
Apply the distinction
In the supplied service contract, $80,000 of qualifying implementation cost is deferred while training and subscription fees remain expense. The deferred balance follows the hosting-service presentation; it is not owned software.
Authority
Read ASC 350-40-25-18 for implementation costs for a hosting arrangement that is a service contract.
Put the concept to work
Analyze this concept
- Separate the software-license or service-contract scope conclusion from configuration, customization, conversion, training, maintenance, and subscription cost classification.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Internal-use software — Apply
To analyze this concept: Helpful. The hosting-service implementation model borrows an activity analysis without turning the arrangement into owned software.