factual details of the income.
3.
Revenue sharing principle:
Usually a variety of products or services are entered into by the cloud service contract
with the user. Enterprises or organizations need to be able to itemize the pricing for
the products or services, or use the estimated selling price of product or service sole
separately as the basis for revenue sharing.
In addition, for information services or cloud services, if the expense for research or
development within a certain period of time involves too many uncertainties, it will be difficult
to determine the corresponding relationship between the expenses and their future benefits.
Currently, the “cost of expenditure” is a recognized principle across the Strait as well as for
many other countries. Based on this principle, the full amount of research and development
expenditure is recognized in the expense and included in the profit or loss for that time
period. Expenditures on research and development activities with future potential need to be
capitalized to realize them in company valuation.
Enterprise or organization’s recognition of expenditures in the cloud environment can be
divided into development expenditures and asset spending
.
1.
Development expenditure:
Since cloud services are derivatives of information services, the accounting
recognition for the related software development and website is similar. Based on the
direct and indirect costs being recognized internally and externally of the enterprises
or organizations, coupled with system development lifecycle from R & D, design,
development, on-line stages, until going on-line, the expenses will stop being
recognized in the development expenditure.
2.
Assets expenses
:
Including direct and indirect costs such as the equipment and human resources
related to the service. Since there are significant changes in net profit in the cloud
service contracts, in practice, enterprise or organization tends to defer recognition, in
order to reduce the activities on avoiding expenditure and expense recognition.
Globally, there is still a lack of clear specification of the cloud service accounting principles.
But the International Accounting Standards Board (IASB) and the U.S. Financial Accounting
Standards Board (FASB) are now aggressively drafting new version of revenue recognition
accounting standards, within which, fulfilling their obligations and amortizing contract costs
are the cloud related items. To fulfill their obligations, the cloud service contract may contain
all sorts of services or products, the content of the draft tend to break down and record the
