ASC Topic 235
Notes to Financial Statements
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ASC 235 governs the notes to financial statements, centering on the requirement in ASC 235-10-50-1 that any financial statements purporting to present fairly in accordance with GAAP include a description of all significant accounting policies as an integral part of the statements — preferably in a separate summary preceding the notes or as the initial note (235-10-50-6). "Accounting policies" are the specific principles and methods management judges most appropriate (235-10-05-3), and disclosure must highlight selections among acceptable alternatives, industry-peculiar methods, and unusual or innovative applications of GAAP (235-10-50-3), without duplicating detail shown elsewhere (235-10-50-5). Several industry subtopics remain: 235-946 (investment companies with multiple classes, master-feeder structures, and funds of funds), 235-972 (common interest realty associations, including unaudited supplementary estimates of future major repairs and replacements), and 932-235 (oil and gas — cost method, capitalized exploratory well costs, and supplementary reserve and standardized measure disclosures for publicly traded entities). The industry overlays for construction contractors (235-910), federal government contractors (235-912), and development stage entities (235-915) are fully superseded, so those entities now rely on the general policy-disclosure requirements of 235-10 together with ASC 606.
Subtopics
- 10Overall24 ¶
ASC 235-10 requires an entity whose financial statements purport to present fairly financial position, cash flows, and results of operations in accordance with GAAP to include a description of all significant accounting policies as an integral part of those statements (235-10-50-1). "Accounting policies" are the specific accounting principles and the methods of applying them that management judges most appropriate in the circumstances (235-10-05-3). The disclosure must cover principles and methods that materially affect the financial statements, especially selections among acceptable alternatives, industry-peculiar methods, and unusual or innovative applications of GAAP (235-10-50-3).
- 910Contractors—Construction5 ¶
ASC 235-910 was the construction-contractor industry supplement to ASC 235 on notes to financial statements, which required disclosure of the accounting policies used for construction-type contracts. Every paragraph in the subtopic (05-1, 15-1, 50-1 and 50-2) was superseded by Maintenance Update No. 2019-01, so the subtopic now contains no operative guidance. Contractors instead look to the general accounting policy disclosure requirements of ASC 235-10 and to the revenue disclosures in ASC 606.
- 912Contractors—Federal Government4 ¶
ASC 235-912 formerly provided accounting-policy disclosure guidance in the notes to financial statements for entities contracting with the federal government. All of its content (paragraphs 235-912-05-1, 15-1 and 50-1) was superseded by ASU 2014-09, the revenue recognition standard, so the subtopic now carries no operative guidance.
- 915Development Stage Entities5 ¶
This subtopic formerly required development stage entities to disclose their accounting policies and their development stage status within the notes to the financial statements. Every paragraph in it (Sections 05, 15, and 50) was superseded by Accounting Standards Update No. 2014-10, which eliminated the development stage entity reporting concept from U.S. GAAP. As a result, there are no remaining requirements under ASC 235-915.
- 932Extractive Activities—Oil and Gas61 ¶
ASC 932-235 sets the note and supplemental disclosure requirements for entities with oil- and gas-producing activities. All such entities must disclose their cost accounting method (successful efforts vs. full cost), how capitalized costs are disposed of, and information about exploratory well costs still capitalized pending determination of proved reserves. Publicly traded companies with significant oil and gas activities must additionally provide, as supplementary information with annual statements, proved reserve quantities and changes, capitalized costs, costs incurred, results of operations, the standardized measure of discounted future net cash flows, and changes in that measure.
- 942Financial Services—Depository and Lending7 ¶
- 944Financial Services—Insurance10 ¶
- 946Financial Services—Investment Companies18 ¶
This Subtopic sets the note disclosure requirements for investment companies with complex capital structures — multiple-class funds, master-feeder arrangements, and funds of funds. Multiple-class funds must describe each class, the income/expense and gain/loss allocation method, class-specific fee arrangements, capital share transactions by class, and sales charges paid to affiliates. Feeder funds must describe the master-feeder structure, their percentage ownership of the master, and the master's accounting policies affecting them, while funds of funds must describe the structure and the valuation policy based on investee-reported values.
- 962Plan Accounting—Defined Contribution Pension Plans1 ¶
- 972Real Estate—Common Interest Realty Associations6 ¶
This Subtopic sets the note disclosure requirements unique to common interest realty associations (CIRAs) — condominiums, homeowners associations, cooperative housing corporations, and time-share associations. Beyond ordinary GAAP disclosures, a CIRA must describe its legal form and the entity it serves, developer services/subsidies and developer-owned units, the proposed use of special assessment funds, and any assessments used for undesignated purposes (235-972-50-1). It must also disclose its funding for future major repairs and replacements (235-972-50-2) and present cost estimates for those repairs and replacements as unaudited supplementary information (235-972-50-3).