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The financial accounting standards board updated their guidance in late 2018 to require calculating the present value of expected future SaaS agreement payments
by mwerd 7y ago
The financial accounting standards board updated their guidance in late 2018 to require calculating the present value of expected future SaaS agreement payments and adding that to the balance sheet, so it’s still CapEx in most cases.
- PNWChris 7y agoDoes such a rule only apply to SaaS with a contract term? If it applies to all SaaS/subscriptions, I feel that's not an appropriate characterization. There's value in having options. If a company had to wind-down some operation or segment, any CapEx in that segment could be considered lost (after applying a discount equivalent to x time using a subscription service, of course). With SaaS you can just terminate any no-term-contract/month-to-month/pay-as-you-go expenses. That flexibility is extremely valuable and makes the company more flexible. Heck, I'd argue accounting should apply an expected future cost discount to such expenses.
- pesfandiar 7y agoBased on my layman understanding, while that changes how numbers are reflected on the books, the reality of how SaaS products improve customers' cashflow is still true.