ASC

ASC 255-912

Contractors—Federal Government

255 Changing Prices

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In brief

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ASC 255-912 tells federal government contractors how to classify certain contract-related balances when they voluntarily disclose supplementary information about the effects of changing prices under Subtopic 255-10. Its core rule is a set of monetary/nonmonetary classifications used to compute the purchasing power gain or loss on net monetary items: contract inventories and fixed-price contract advances and warranty obligations are nonmonetary, while accrued losses on contracts are monetary.

Key points (6)
  • The Subtopic provides guidance to government contractors on disclosure of supplementary information about financial reporting and changing prices (255-912-05-1), and follows the scope of Section 912-10-15 (255-912-15-1).
  • The guidance applies only to contractors electing to disclose supplementary changing-prices information in accordance with Subtopic 255-10 (255-912-50-1).
  • Contract inventories are not monetary assets because the negotiated contract price already provides for the estimated effects of inflation during contract performance (255-912-50-1(a)).
  • Advances on fixed-price contracts, though current liabilities, are nonmonetary because they represent the government's claim to nonmonetary goods or services rather than a right to receive money (255-912-50-1(b)).
  • Obligations under warranties are nonmonetary because they obligate the contractor to furnish goods or services at future prices (255-912-50-1(b)).
  • Accrued losses on contracts are monetary items because they are in essence future accounts payable (255-912-50-1(c)).

For students. Disclosure here is elective, not required — the Subtopic only kicks in if a contractor chooses to present changing-prices supplementary data. The common trap is assuming a current liability like a fixed-price contract advance is automatically monetary; it is nonmonetary because it is settled in goods or services, not cash.

changing pricespurchasing power gain or lossnet monetary itemsmonetary versus nonmonetary classificationcontract inventoriescontract advanceswarranty obligationsaccrued contract losses

Machine-generated study aid for ASC 255-912. Check the source paragraphs below.

255-912-05Overview and Background

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255-912-05-1
This Subtopic provides guidance to government contractors related to disclosure of supplementary information about financial reporting and changing prices.

255-912-15Scope and Scope Exceptions

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Overall Guidance

255-912-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 912-10-15.

255-912-50Disclosure

Source downloaded: .Record version 9419311e0349. Effective date must be checked in the source.

Financial Reporting and Changing Prices

255-912-50-1
For those contractors electing to disclose supplementary information on the effects of changing prices in accordance with Subtopic 255-10 all of the following matters shall be taken into consideration in calculating the purchasing power gain or loss on net monetary items:
  1. a
    Contract inventories are not considered to be monetary assets, because the negotiated price of the contract under which the inventories are produced provides for the estimated effects of inflation during the period of contract performance.
  2. b
    Advances related to fixed-price contracts, although considered current liabilities, shall be classified as nonmonetary items because they represent the government's claims to nonmonetary goods or services; in other words, these advances are not rights to receive money. Additionally, obligations under warranties shall be classified as nonmonetary items because they obligate the contractor to furnish goods or services at future prices.
  3. c
    Accrued losses on contracts shall be classified as monetary items because they are, in essence, future accounts payable.

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