6.6
Accounting System Adjustment
Synopsis
:
1.
Cloud service model change and impact on accounting principles and
compliance
2.
Recommendations in the accounting practices on transnational cloud services
(
especially for multinational contractors)
With innovative cloud computing technology as well as the rise of cloud services, enterprises
are rushing to adopt related applications. More IT and business management issues are
developing for cloud services. To the senior management, the focus is how much can cloud
service reduce costs and generate revenue. The features for Cloud services include
on-demand self-service, board network access, resource pooling, rapid elasticity, and
measured services. The enterprise or organization accounting issues derived from cloud
services mainly include the recognition of revenue generated from cloud services and the
separation of the expenditure for dynamic resource pool configuration.
Enterprises select to use cloud services will be able to eliminate a significant amount of
capital expenditure on IT infrastructure, and can expense the cost on adopting a flexible
cloud service model suitable for the development of the enterprise or organization. This
recognition of fixed expense will allow enterprises or organization to be more focused on
core competencies. Reversely, the cloud services offered by the cloud service providers are
different from the past IT service. The degree of the flexible and dynamic service
composition is much higher than that of the traditional IT services. Using the international
accounting system by the International Financial Reporting Standards (IFRSs), the topics of
interest for cloud service revenue, from income generation to distribution, adhere to the
following principles: revenue recognition principle, determining the recognition time, and the
principle of revenue sharing.
1.
Revenue recognition principle:
As stated, the composition of the cloud services usually contains many different types
of products or services with different delivery time to customers. The accounting office
need to be able to determine and distinguish the various corresponding products and
services that need to be recognized.
2.
Determining the recognition time:
The time for revenue recognition for the services and products that compose cloud
services need to be done following the relevant accounting standards. The
determination of cloud services revenue recognition time must be made based on
