accounting

New Accounting Rules Could Hurt Cloud Hosting Resellers

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The US Financial Accounting Standards Board and International Accounting Standards Board has proposed new accounting rules that will automatically group IT equipment as a capital asset for customers regardless of where it is physically located, according to a report by Channel Insider.

The rules, which will likely be finalized this year and implemented in the 2014-2015 season, is designed to make business operations more transparent as companies will be required to add their leased assets to their balance sheet as a capital asset.

The new accounting rules could be good news for providers of cloud infrastructure and services, bring along new business opportunities.

But on the other side of the spectrum, the new rules could have a negative impact on cloud service resellers and force them to change their business models and practices.

Since most companies don’t publicize the details of their IT leasing contracts, the new accounting rules will cause these companies to reassess whether they should lease or buy their IT services and equipment.

Customers will likely benefit from the rules since moving their data to the cloud will qualify the activity as an operating expense and make their balance sheets seem more attractive to investors.

At the same time, companies will have to account for the percentage of IT infrastructure they are using in software-as-a-service deployment or public cloud computing environment.

The new rules are still a work in progress and therefore susceptible to several changes, but whatever the finalized rules may be they are sure to have a considerable impact on hosting and cloud computing.

The details of the new accounting rules emerge in the same month as several cloud computing. Earlier this month, Market Publishers released a report that showed that the entire cloud services US market was valued at $15.1 billion in 2011, and is projected to grow by $9.2 billion over the next three years to reach $24.3 billion in 2014.

Then earlier this week, Rackspace released its Cloud Reality Check survey which showed that both UK and US IT teams are spending more than half of their time on server management and troubleshooting on an average month.

Talk Back: Will these new account rules make you consider building your own cloud platform instead of leasing? Do you think the accounting rules will have an overall positive impact on cloud hosting? Let us know in the comments.

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