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Dexus: Accounting for “Cloud Computing Arrangement”

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This case explores the accounting treatment for the costs attributable to cloud computing arrangements.  The protagonist company is Dexus Diversified Fund (Dexus or the Group, ASX: DXS), one of the largest and most prominent real estate groups in Australia.

In April 2021, the International Accounting Standards Board (IASB) ratified an agenda decision entitled Configuration and Customisation Costs in a Cloud Computing Arrangement. This decision governed the appropriate accounting treatment of cloud computing costs. This update on accounting treatment was added because of the global trend toward technology, data, and connectivity. It was more common for customers to not possess the underlying software. Rather, customers accessed and used the software on an as-needed basis. As the original IFRS did not contain explicit guidance on accounting for cloud computing costs, this update was aimed at clarifying this aspect. Dexus had deployed SaaS in its operations and incurred millions in cloud computing costs. Throughout its latest annual report as of 2021, the Group adopted the update in its accounting treatment and clearly disclosed the financial impacts.

This case is developed for use in elementary, intermediate, and advanced accounting courses at bachelor, postgraduate, doctoral, and executive levels. The decision-making tree, accounting treatment, and financial implications for an entity to apply the update should be the key concepts to explore in the case. The issues on how to consider changes in accounting policies and in accounting estimates and errors are also explored in the case.

Learning Objective:

On completion of the case, students will be able to:

1. Understand how cloud computing arrangements work and the significance for a business

2. Apply the appropriate accounting classification for cloud computing costs in different categories

3. Adopt the appropriate accounting treatment for the cloud computing costs being classified

4. Indicate the financial implications upon the application of the accounting update on cloud computing arrangements

5. Evaluate the appropriateness of prospective versus retrospective accounting adjustment

Year of Publication: 2022
Ref. No.: 21/720C
Discipline: Accounting & Control
Industry: Real Estate
Country: Australia
Company: Dexus Diversified Trust
Languages: English
Pages of Text: 6