As cloud computing became more popular, businesses took different approaches to how they accounted for it on their financial statements. But, as the percentage of businesses using cloud products increased, the FASB and other standard setters realized that the “diversity” in practice was growing too large, and began to issue regulations to clarify the process of handling service contract implementations.
FASB ASU No. 2018-14 is effective for all filers after Dec 15, 2019. To help organizations properly account for and to manage cloud computing contracts, the ASU includes a three-step process that consists of determining whether an arrangement has a software license included. Read this NetSuite blog post to learn more.