As part of its simplification initiative, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update on August 20 that addresses accounting principles related to cloud computing arrangements. The proposed update is intended to provide customers in such arrangements with guidance about the financial reporting of fees paid for cloud computing services.

According to the proposed guidance, customers would account for cloud computing arrangements based on whether the arrangement is a software license or a service contract. The proposed guidance then offers assistance in determining when a particular cloud arrangement falls into one of those two categories. If approved, the guidance would go into effect for public business entities for annual periods (including interim periods within those annual periods) starting December 15, 2015.