SOCPA Provides Remarks on the Preliminary Decision of the International Standards Interpretations Co

SOCPA Provides Remarks on the Preliminary Decision of the International Standards Interpretations Committee

SOCPA Provides Remarks on the Preliminary Decision of the International Standards Interpretations Committee

The Saudi Organization for Chartered and Professional Accountants provided its opinion on the initial decision of the International Financial Reporting Interpretations Committee of the International Accounting Standards Board related to accounting for amounts paid for preparation or allocation costs in a cloud computing arrangement.
In its comment on that initial decision, SOCPA considered that this decision is linked to a decision issued by the Committee in 2019 regarding accountability for the client's rights to access the programs of the hosted service provider on cloud services, and that a reference must be made to that decision because of its link to the decision in question.
And since the costs of setting up or assigning in the arrangements of cloud computing are related to the service itself, and it is not possible to benefit from the service except by preparing for it, SOCPA has deemed that dealing with the costs of the setup follows the accounting for the service itself, and whether it is an asset or a service contract that is proven within the expenses in accordance with International Accounting Standard No. 38.
Whereas the decision stipulates that the service itself is an expense to be recognized in accordance with the requirements of International Accounting Standard No. 38, it is therefore necessary to consider the setup costs an integral part of the costs of the service itself, and then it must be proven regularly over the life of the contract during which the customer benefits from the cloud service Therefore, IAS 38 is sufficient to process the transaction in accordance with its paragraph 69, and there is no need to refer to IFRS 15 to consider the extent of the similarity of the transaction with the transaction providing service by the seller.

SOCPA detailed remarks can be found by clicking here.

Last Update On: 02 Aug 2021