ASU 2018-15 Cloud Computing Arrangement Implementation Costs

What it covers for cloud AI

When you rent access to a model or an AI platform you do not control, you are in a cloud computing arrangement that is a service contract. ASU 2018-15 confirms that the hosting fee is a service expensed as received, and that only the implementation costs, the work to configure, integrate and make the service usable, are eligible for capitalization on the same basis as an internal-use software build.

Which implementation costs are capitalizable

• Configuration and integration coding performed in the application-development stage is capitalized ASC 350-40-25.
• Data conversion, training and ongoing operation are expensed.
• The capitalized implementation asset is amortized over the term of the hosting arrangement, including reasonably certain renewals.

The distinction that drives the posting is service contract vs software license. If the arrangement conveys a license to software the customer controls, it is not a CCA and different guidance applies. The service-contract test is set out on the ASC 350-40 internal-use page and worked through in the mechanics.