{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/340/40/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"340","topic_title":"Other Assets and Deferred Costs","subtopic":"340-40","subtopic_title":"Contracts with Customers","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":"Contract Costs","paragraphs":[{"citation":"340-40-25-1","para":"25-1","html":"
An entity shall recognize as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs.
","snippet":"An entity shall recognize as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:137da2a8902473362c929cd11a2895b0063f2be2f20c20b3da9d4793194b8da1","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-2","para":"25-2","html":"
The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission).
","snippet":"The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commiss…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1de5141167b672ec645fb06b7fd58945038706bf93b0773946b9f0f66cb6bd2c","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-3","para":"25-3","html":"
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
","snippet":"Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b4e78331cca9917724f8597e8b6e1b71939a0b5d867da1109f6a4659e6a1eb32","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-4","para":"25-4","html":"
As a practical expedient, an entity may recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
","snippet":"As a practical expedient, an entity may recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one y…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7f12d17f7c98ac9772d13588d01533db3633c1b6ac717fd492e951b5579404ee","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-5","para":"25-5","html":"
An entity shall recognize an asset from the costs incurred to fulfill a contract only if those costs meet all of the following criteria:
  1. a
    The costs relate directly to a contract or to an anticipated contract that the entity can specifically identify (for example, costs relating to services to be provided under renewal of an existing contract or costs of designing an asset to be transferred under a specific contract that has not yet been approved).
  2. b
    The costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.
  3. c
    The costs are expected to be recovered.
","snippet":"An entity shall recognize an asset from the costs incurred to fulfill a contract only if those costs meet all of the following criteria:\n(a) The costs relate directly to a contract or to an anticipated contract that the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:28947de1eb8057c886dc5fd4e6b33fcc29cf364181bbec23934b4db51c30a1cc","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-6","para":"25-6","html":"
For costs incurred in fulfilling a contract with a customer that are within the scope of another Topic (for example, Topic 330 on inventory; paragraphs
340-10-25-1 through 25-4
on preproduction costs related to long-term supply arrangements; Subtopic 350-40 on internal-use software; Topic 360 on property, plant, and equipment; or Subtopic 985-20 on costs of software to be sold, leased, or otherwise marketed), an entity shall account for those costs in accordance with those other Topics or Subtopics.
","snippet":"For costs incurred in fulfilling a contract with a customer that are within the scope of another Topic (for example, Topic 330 on inventory; paragraphs 340-10-25-1 through 25-4 on preproduction costs related to long-term…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5f053d4235d777c945c0668a7113a9183f27c83e5c7e227ce33906c25cd24f3e","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-7","para":"25-7","html":"
Costs that relate directly to a contract (or a specific anticipated contract) include any of the following:
  1. a
    Direct labor (for example, salaries and wages of employees who provide the promised services directly to the customer)
  2. b
    Direct materials (for example, supplies used in providing the promised services to a customer)
  3. c
    Allocations of costs that relate directly to the contract or to contract activities (for example, costs of contract management and supervision, insurance, and depreciation of tools and equipment used in fulfilling the contract)
  4. d
    Costs that are explicitly chargeable to the customer under the contract
  5. e
    Other costs that are incurred only because an entity entered into the contract (for example, payments to subcontractors).
","snippet":"Costs that relate directly to a contract (or a specific anticipated contract) include any of the following:\n(a) Direct labor (for example, salaries and wages of employees who provide the promised services directly to the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cfdd1908f5454178357265cec167fed59dd3f3da177119a3524e8c6d9a272b11","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},{"citation":"340-40-25-8","para":"25-8","html":"
An entity shall recognize the following costs as expenses when incurred:
  1. a
    General and administrative costs (unless those costs are explicitly chargeable to the customer under the contract, in which case an entity shall evaluate those costs in accordance with paragraph 340-40-25-7)
  2. b
    Costs of wasted materials, labor, or other resources to fulfill the contract that were not reflected in the price of the contract
  3. c
    Costs that relate to satisfied performance obligations (or partially satisfied performance obligations) in the contract (that is, costs that relate to past performance)
  4. d
    Costs for which an entity cannot distinguish whether the costs relate to unsatisfied performance obligations or to satisfied performance obligations (or partially satisfied performance obligations).
","snippet":"An entity shall recognize the following costs as expenses when incurred:\n(a) General and administrative costs (unless those costs are explicitly chargeable to the customer under the contract, in which case an entity shal…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86bea2cbc4dfcffbef49df4a0e6f2e79ea9e65f4912784ce99392eb4e3e21b49","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:196d0c34d070b727abcdf8b6ae1c8c7510ce8fe09b41df2a940a04ce5f8f271f","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47a557fe75b87bc0fc9a34f4a5309a589fea280d9bd711dfcde5f20c991c8750","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47a557fe75b87bc0fc9a34f4a5309a589fea280d9bd711dfcde5f20c991c8750","downloaded_from":"2026-09-09T23:56:19.382Z","last_downloaded_at":"2026-09-09T23:56:19.382Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479542","source_sha256":"470595e448ce9d47f34c9cb222c28895ce86af6d43b9107f87c37d317b7f0e0c"}}