Software as a service

What is cloud computing and more specific software as a service?

Cloud computing is essentially a model for delivering information technology services in which resources are retrieved from the internet through web-based tools and applications, rather than a direct connection to a server. Data and software packages are stored in servers. Cloud computing structures allow access to information as long as an electronic device has access to the internet.

This type of system allows employees to work remotely. Cloud computing is so named because the information being accessed is found in the ‘clouds’, and does not require a user to be in a specific place to gain access to it. Companies may find that cloud computing allows them to reduce the cost of information management, since they are not required to own their own servers and can use capacity leased from third parties. Additionally, the cloud-like structure allows companies to upgrade software more quickly.

There are various types of cloud computing arrangements. Cloud services usually fall into one of three service models: infrastructure, platform and software. Here the focus is on software as a service (SaaS).

What is SaaS?

SaaS is a software distribution model in which the customer does not take possession of the supplier’s hardware andSoftware as a service application software. Instead, customers accesses the supplier’s hardware and application software from devices over the internet or via a dedicated line. In these types of arrangements, the customer does not manage or control the underlying cloud infrastructure, including the network, servers, operating systems, storage, and even individual application software capabilities, with the possible exception of limited user-specific application software configuration settings, nor is the customer responsible for upgrades to the underlying systems and software.

The key issues

In practice, it is clear that there are various application issues relating to the customer’s accounting in SaaS arrangements. These arrangements may often be bundled with other products and services, such as implementation, data migration, business process mapping, training, and project management.

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Licensing provides rights to a customer

LicensingLicensing establishes a customer’s rights to the intellectual property of an entity. Licenses of intellectual property may include, but are not limited to, licenses of any of the following:


  1. Software (other than software subject to a hosting arrangement) and technology
  2. Motion pictures, music, and other forms of media and entertainment
  3. Franchises Licensing
  4. Patents, trademarks, and copyrights. Licensing

In addition to a promise to grant a license (or licenses) to a customer, an entity may also promise to transfer other goods or services to the customer. Those promises may be explicitly stated in the contract or implied by an entity’s customary business practices, published policies, or specific statements. As with other types of contracts, when a contract with a customer includes Read more

Distinct goods or services

Distinct goods or services is a cornerstone of IFRS 15 Revenue from contracts with customers. Distinct means the customer can benefit directly from the service

Intangible valuation approach

Intangible valuation approachIntangible valuation approach – Valuation assignments must estimate the value of intangibles, recognising the volatility, ongoing creation and problems with protection and enforcement. Business valuation analysts have been independently valuing intangible assets for many years, usually in the context of an exchange between owners (transaction), for estate and gift tax purposes or as part of a litigation assignment. Knowledge underlies the creation of value. Some of the questions that need to be answered include the following:

Adjusted net asset method

Adjusted net asset methodThe adjusted net asset method is used to value a business based on the difference between the fair market value of the business assets and its liabilities. Depending on the particular purpose or circumstances underlying the valuation, this method sometimes uses the replacement or liquidation value of the company assets less the liabilities.

Under this method, the analyst adjusts the book value of the assets to fair market value (generally measured as replacement value or liquidation value) and then reduces the total adjusted value of assets by the fair market value of all recorded and unrecorded liabilities. Both tangible and identifiable intangible assets are valued in determining total adjusted net assets.

If the analyst will be relying on other professional Read more

IFRS 13 Relief from royalty method

IFRS 13 Relief from royalty methodIFRS 13 Relief from royalty method – The ‘Royalty Relief’ (also known as Relief from Royalty) method is based on the notion that a brand holding company owns the brand and licenses it to an operating company.  One method to determine the market value of Intellectual Property assets like patents, trademarks, and copyrights is to use Relief from royalty method (also known as Royalty avoidance approach or Royalty Relief approach). This approach determines the value of Intellectual Property assets by estimating what it would cost the business if it had to purchase the Intellectual Property (IP) it uses from an outsider. Other valuation methods are provide here.

This approach requires the valuator to

  1. project future sales of the products
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IAS 38 What are Intangible Assets other than Goodwill?

IAS 38 What are Intangible Assets other than Goodwill – Intangible assets have become a important reporting item, see history of intangible assets to get an introduction. An asset, which has no physical existence such as corporate intellectual properties (patents, trademarks, business methodologies and copyrights), trademarks, patents, software, goodwill and brand recognition are known to be an “Intangible asset”.

Types of Intangible assets and their recognition IAS 38 What are Intangible Assets other than Goodwill?

Intangible assets of the business are either acquired through a business combination or are developed internally. In most of the cases if the asset is acquired through an Read more

Artistic-related intangible assets

Artistic-related intangible assets – In a Business Combinations, these are intangible assets and are therefore recognised separately from goodwill, provided that their fair values can be measured reliably. These artistic-related intangible assets meet the definition of an intangible asset because they arise from contractual or other legal rights.

Artistic-related intangible assetsArtistic-related assets acquired in a business combination meet the criteria for identification as intangible assets if they arise from contractual or legal rights such as those provided by copyright. Copyrights can be transferred either in whole through assignments or in part through licensing agreements. An entity is not precluded from recognising a copyright-intangible asset and any related assignments provided they have similar useful lives.

  1. Plays, operas and ballets
  2. Books, magazines, newspapers
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Assets as an element of financial statements

Assets as an element of financial statements – Definition: An asset is a present economic resource controlled by the entity as a result of past events. Assets as an element of financial statements

An economic resource is a right that has the potential to produce economic benefits. Assets as an element of financial statements

Tangible assets are those that can be touched. Examples include: Assets as an element of financial statements

– Buildings, – Cash on deposit, – Cash on hand, – Certificates of deposit or CDs, – Commercial paper, – Corporate bonds, – Corporate stock, – Debentures held, – Equipment, – Federal agency securities, – Federal treasury notes, – Guaranteed investment accounts, – Inventory, – Land, – … Read more