# ASC 340-10-55: Other Assets and Deferred Costs — Overall — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/340/10/#55-implementation-guidance-and-illustrations)

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## ASC 340-10-55: 55 Implementation Guidance and Illustrations

[Read section](https://asc.understandingaccounting.org/asc/340/10/#55-implementation-guidance-and-illustrations)

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##### [340-10-55-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-1)

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[Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/).

#### Illustrations

##### [340-10-55-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-2)

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This Example illustrates the recognition guidance in paragraphs

[340-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1)

. It is assumed that the design and development costs would be expensed under that guidance absent a reimbursement arrangement. It is also assumed that the supply arrangement is legally enforceable. An entity enters into a long-term arrangement with a supplier in which the entity agrees to reimburse the supplier for preproduction design and development costs incurred under the arrangement, up to a maximum reimbursement of $1,000,000. Under this arrangement, the amount of reimbursement for design and development costs can be objectively measured and verified. The supplier shall recognize the design and development costs as an asset as costs are incurred, up to a maximum of $1,000,000.

##### [340-10-55-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-3)

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This Example illustrates the recognition guidance in paragraphs

[340-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1)

. It is assumed that the design and development costs would be expensed under that guidance absent a reimbursement arrangement. It is also assumed that the supply arrangement is legally enforceable. An entity enters into a long-term arrangement with a supplier in which the entity agrees to pay the supplier $55 per part for the first 200,000 parts produced and $50 for every part thereafter. No agreement exists concerning reimbursement of the supplier's design and development costs if fewer than 200,000 parts are produced under the arrangement. Under this arrangement, the amount of reimbursement for design and development costs cannot be objectively measured and verified. The supplier shall expense the preproduction design and development costs as incurred.

##### [340-10-55-4](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-4)

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This Example illustrates the recognition guidance in paragraphs

[340-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1)

. It is assumed that the design and development costs would be expensed under that guidance absent a reimbursement arrangement. It is also assumed that the supply arrangement is legally enforceable. An entity enters into a long-term arrangement with a supplier in which the entity agrees to pay the supplier $55 per part for the first 200,000 parts produced and $50 for every part thereafter. The arrangement provides that if fewer than 200,000 parts are produced, the supplier will be reimbursed for design and development costs incurred under the arrangement, up to a maximum reimbursement of $1,000,000 reduced by $5 per part for each part produced under the supply arrangement. For example, if 190,000 parts are produced under the supply arrangement, in addition to the $55 per part received for the parts produced, the supplier would be reimbursed for design and development costs incurred under the arrangement, up to a maximum of $50,000 \[$1,000,000 - ($5 X 190,000)\]. Under this agreement, the amount of reimbursement for design and development costs can be objectively measured and verified. The supplier shall recognize the design and development costs as an asset as costs are incurred, up to a maximum of $1,000,000.

##### [340-10-55-5](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-5)

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Effective as of: not established by retrieval timestamps.


This Example illustrates the recognition guidance in paragraphs

[340-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1)

. It is assumed that the design and development costs would be expensed under that guidance absent a reimbursement arrangement. It is also assumed that the supply arrangement is legally enforceable. An entity enters into a long-term arrangement with a supplier in which the entity agrees to pay the supplier $52.50 per part. The arrangement requires that a minimum of 400,000 parts be produced. If fewer than 400,000 parts are produced under the arrangement, the supplier will receive a payment of $52.50 per part not produced under the arrangement, up to a maximum of 400,000 parts. Under this arrangement, the amount of reimbursement for design and development costs cannot be objectively measured and verified. The supplier shall expense the design and development costs as incurred.