# ASC 340-40: Other Assets and Deferred Costs — Contracts with Customers Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/340/40/) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:56:07.379Z to 2026-09-09T23:56:34.589Z Record version: sha256:11b94ff78ae44fa9f4f3f83e5cb927edbbaf9f07cb92f536e75e3c14e210a91f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40: Other Assets and Deferred Costs — Contracts with Customers ### Machine-generated study aids ```json { "summary": "ASC 340-40 governs capitalization, amortization, and impairment of two kinds of contract costs for contracts within the scope of Topic 606: incremental costs of obtaining a contract and costs to fulfill a contract that are not within the scope of another Topic. Incremental costs of obtaining a contract (e.g., sales commissions) are capitalized if the entity expects to recover them (340-40-25-1), while fulfillment costs are capitalized only if they relate directly to an identifiable (or specifically anticipated) contract, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered (340-40-25-5). Capitalized amounts are amortized consistently with transfer of the related goods or services and tested for impairment, with no reversal of impairment losses.", "key_points": [ "An entity shall recognize as an asset the incremental costs of obtaining a contract—costs it would not have incurred had the contract not been obtained, such as a sales commission—if it expects to recover them (340-40-25-1 through 25-2); costs that would have been incurred regardless are expensed when incurred unless explicitly chargeable to the customer regardless of whether the contract is obtained (340-40-25-3).", "Practical expedient: incremental costs of obtaining a contract may be expensed as incurred if the amortization period of the asset otherwise recognized would be one year or less (340-40-25-4), and use of the expedient must be disclosed (340-40-50-5).", "Fulfillment costs are capitalized only if all three criteria in 340-40-25-5 are met (direct relation to an identified or specifically anticipated contract, generation or enhancement of resources used to satisfy future performance obligations, and expected recovery); costs within the scope of Topic 330, 340-10-25-1 through 25-4, Subtopic 350-40, Topic 360, or Subtopic 985-20 follow those Topics instead (340-40-25-6; 340-40-15-3).", "General and administrative costs, wasted materials/labor not priced into the contract, costs relating to satisfied or partially satisfied performance obligations, and costs that cannot be distinguished between satisfied and unsatisfied obligations are expensed as incurred (340-40-25-8); costs that relate directly to a contract are listed in 340-40-25-7.", "The capitalized asset is amortized on a systematic basis consistent with the transfer of the goods or services to which it relates, including goods or services under anticipated renewals (340-40-35-1; Example 2 amortizes a commission over seven years for a five-year contract with two expected renewals), and changes in expected timing are accounted for as a change in accounting estimate under Subtopic 250-10 (340-40-35-2).", "An impairment loss is recognized to the extent carrying amount exceeds remaining expected consideration (determined using transaction price principles but ignoring the variable consideration constraint, adjusted for customer credit risk and including expected renewals/extensions) less the directly related costs not yet expensed (340-40-35-3 through 35-4); other-Topic assets are tested first and the remaining carrying amount is then included in the asset group or reporting unit under Topics 360 and 350 (340-40-35-5).", "Reversal of a previously recognized impairment loss is prohibited (340-40-35-6); required disclosures include judgments made, amortization method, closing balances by main category of asset, and amortization and impairment amounts (340-40-50-2 through 50-3), which non-PBEs may elect not to provide (340-40-50-4)." ], "categories": [ "Recognition", "Subsequent measurement", "Impairment", "Revenue" ], "audience_level": "intermediate", "student_note": "This is the cost-side companion to Topic 606 and a frequent exam trap: a sales commission tied to obtaining a specific contract is capitalized, but discretionary bonuses and legal/travel costs incurred whether or not the bid was won are expensed. Students also commonly amortize the asset over the stated contract term instead of the longer expected period including anticipated renewals, and forget that impairment losses can never be reversed.", "related_topics": [ "606", "330", "350-40", "360", "985-20", "340-10" ], "key_concepts": [ "incremental costs of obtaining a contract", "costs to fulfill a contract", "sales commission", "expected recovery", "amortization period including anticipated renewals", "contract cost impairment test", "practical expedient one year or less", "anticipated contract" ] } ``` Source downloaded (UTC): 2026-09-09T23:56:07.379Z to 2026-09-09T23:56:07.379Z Record version: sha256:d7b9a13f66389c399785c8b3af35ff0689a8baff2385f6c0dc8004a49ea97ee4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/40/#00-status) SEC content: no ##### [340-40-00-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:07.379Z to 2026-09-09T23:56:07.379Z Record version: sha256:649dcb4b435d89342aaa43f10f8730c57b1efc2e0de12e29ae1ee5fed505ca37 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
ContractAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
Not-for-Profit EntityAddedAccounting Standards Update No. 2014-0905/28/2014
Performance ObligationAddedAccounting Standards Update No. 2014-0905/28/2014
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAmendedMaintenance Update 2016-11 (PDF)06/27/2016
Public Business EntityAddedAccounting Standards Update No. 2014-0905/28/2014
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
Transaction PriceAddedAccounting Standards Update No. 2014-0905/28/2014
340-40-05-1AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-05-2AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-15-1 through 15-3
AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-25-1 through 25-8
AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-35-1 through 35-6
AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-35-3 through 35-5
AmendedAccounting Standards Update No. 2016-2012/21/2016
340-40-50-1 through 50-6
AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-50-3AmendedAccounting Standards Update No. 2024-0311/04/2024
340-40-55-1 through 55-9
AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-60-1AddedAccounting Standards Update No. 2014-0905/28/2014
340-40-60-2AddedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:56:11.011Z to 2026-09-09T23:56:11.011Z Record version: sha256:9f928f59c61106c79c2016114a2c89b70918fb8422a061e0746a892a884b7f6b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/40/#05-overview-and-background) SEC content: no ##### [340-40-05-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:11.011Z to 2026-09-09T23:56:11.011Z Record version: sha256:9412dfc9ad2a31461b7d489480d49273fa2703718acd4af616aeba6032dc5fb0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides accounting guidance for the following costs related to a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") within the scope of Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from contracts with customers: 1. a Incremental costs of obtaining a contract with a customer 2. b Costs incurred in fulfilling a contract with a customer that are not in the scope of another Topic. ##### [340-40-05-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:11.011Z to 2026-09-09T23:56:11.011Z Record version: sha256:53dd85b84a109a9108e61ca3a34a33088748be3a85f54b354307aee3371fbc1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs presented in **bold type** in this Subtopic state the main principles. All paragraphs have equal authority. Source downloaded (UTC): 2026-09-09T23:56:14.365Z to 2026-09-09T23:56:14.365Z Record version: sha256:d4b6d22714a51330b095bc19224579599098fcca780cabf1e1b351b056e70b80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/40/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-40-15-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:14.365Z to 2026-09-09T23:56:14.365Z Record version: sha256:27de511ca2d03f1f4b21e0e115e0df0284658a7b61222aabe924eb484a239024 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic (see Section 340-10-15), with specific qualifications and exceptions noted below. #### Transactions ##### [340-40-15-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:14.365Z to 2026-09-09T23:56:14.365Z Record version: sha256:1da156a5ff8df1e7ae55f89ee61270a8f30b98fc3fd757d576d2b1499ba5a438 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the incremental costs of obtaining a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") within the scope of Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from contracts with customers (excluding any consideration payable to a customer, see paragraphs [606-10-32-25 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25) ). ##### [340-40-15-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:14.365Z to 2026-09-09T23:56:14.365Z Record version: sha256:b5289df7d896a6745e359e6cede705b6f33f88b3f12d1d5fc34f170a3e86ba77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the costs incurred in fulfilling a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") within the scope of Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from contracts with customers, unless the costs are within the scope of another Topic or Subtopic, including, but not limited to, any of the following: 1. a Topic 330 on inventory 2. b Paragraphs [340-10-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1) on preproduction costs related to long-term supply arrangements 3. c Subtopic 350-40 on internal-use software 4. d Topic 360 on property, plant, and equipment 5. e Subtopic 985-20 on costs of software to be sold, leased, or otherwise marketed. Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:47a557fe75b87bc0fc9a34f4a5309a589fea280d9bd711dfcde5f20c991c8750 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/40/#25-recognition) SEC content: no #### Contract Costs ##### [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:137da2a8902473362c929cd11a2895b0063f2be2f20c20b3da9d4793194b8da1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **An entity shall recognize as an asset the incremental costs of obtaining a** [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") **with a** [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") **if the entity expects to recover those costs.** ##### [340-40-25-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:1de5141167b672ec645fb06b7fd58945038706bf93b0773946b9f0f66cb6bd2c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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). ##### [340-40-25-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:b4e78331cca9917724f8597e8b6e1b71939a0b5d867da1109f6a4659e6a1eb32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [340-40-25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:7f12d17f7c98ac9772d13588d01533db3633c1b6ac717fd492e951b5579404ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:28947de1eb8057c886dc5fd4e6b33fcc29cf364181bbec23934b4db51c30a1cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **An entity shall recognize an asset from the costs incurred to fulfill a** [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") **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](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") **in the future.** 3. c **The costs are expected to be recovered**. ##### [340-40-25-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:5f053d4235d777c945c0668a7113a9183f27c83e5c7e227ce33906c25cd24f3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For costs incurred in fulfilling a contract with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") that are within the scope of another Topic (for example, Topic 330 on inventory; paragraphs [340-10-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1) 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. ##### [340-40-25-7](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:cfdd1908f5454178357265cec167fed59dd3f3da177119a3524e8c6d9a272b11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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). ##### [340-40-25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:19.382Z to 2026-09-09T23:56:19.382Z Record version: sha256:86bea2cbc4dfcffbef49df4a0e6f2e79ea9e65f4912784ce99392eb4e3e21b49 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/340/40/#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). Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:96771d0c18eea39eb291a1f63ed2c09fd90d4d7341704a18087f75ddff672a1e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/40/#35-subsequent-measurement) SEC content: no #### Amortization and Impairment ##### [340-40-35-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:2dc74d77b8c9d0b6c9cea572678566db551ce3d04e5cb603cb88499979fadca3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An asset recognized in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) shall be amortized on a systematic basis that is consistent with the transfer to the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") of the goods or services to which the asset relates. The asset may relate to goods or services to be transferred under a specific anticipated [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") (as described in paragraph [340-40-25-5(a)](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5)). ##### [340-40-35-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:c70842d340d8fd3d8e8a30c7bd613226ce4d46f5d216bac0749a178cc2938c88 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall update the amortization to reflect a significant change in the entity's expected timing of transfer to the customer of the goods or services to which the asset relates. Such a change shall be accounted for as a change in accounting estimate in accordance with Subtopic 250-10 on accounting changes and error corrections. ##### [340-40-35-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:2bd206ea9b4c3c3414f3a988635c8598c4e82816b9dccc24bbaff4996f267ee2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize an impairment loss in profit or loss to the extent that the carrying amount of an asset recognized in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) exceeds: 1. a The amount of consideration that the entity expects to receive in the future and that the entity has received but has not recognized as revenue, in exchange for the goods or services to which the asset relates (“the consideration”), less 2. b The costs that relate directly to providing those goods or services and that have not been recognized as expenses (see paragraphs [340-40-25-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-2) and [340-40-25-7](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-7)). ##### [340-40-35-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:7fa8b7cbef7a6e83fbb9088ae6e23d862f412e31d5b43586ad7c3bd1470e647b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purposes of applying paragraph [340-40-35-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-3) to determine the consideration, an entity shall use the principles for determining the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") (except for the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration) and adjust that amount to reflect the effects of the customer's credit risk. When determining the consideration for the purposes of paragraph [340-40-35-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-3), an entity also shall consider expected contract renewals and extensions (with the same customer). ##### [340-40-35-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:c9204fa1b9c1b7f30aebded6c7b829ba7cb5cdd8f10f7fc4da5679933561fabc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Before an entity recognizes an impairment loss for an asset recognized in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5), the entity shall recognize any impairment loss for assets related to the contract that are recognized in accordance with another Topic other than Topic 340 on other assets and deferred costs, Topic 350 on goodwill and other intangible assets, or Topic 360 on property, plant, and equipment (for example, Topic 330 on inventory and Subtopic 985-20 on costs of software to be sold, leased, or otherwise marketed). After applying the impairment test in paragraph [340-40-35-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-3), an entity shall include the resulting carrying amount of the asset recognized in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) in the carrying amount of the asset group or reporting unit to which it belongs for the purpose of applying the guidance in Topics 360 and 350. ##### [340-40-35-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:23.447Z to 2026-09-09T23:56:23.447Z Record version: sha256:c24f5670ff80b307d7aece51c655b46e4cc57890466b669f66d6fa392a63a461 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall not recognize a reversal of an impairment loss previously recognized. Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:fa268ef1ee847b5c6236782d6edc12915ef1a154173d4452400da523fc91f1de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/40/#50-disclosure) SEC content: no #### Assets Recognized from the Costs to Obtain or Fulfill a Contract with a Customer ##### [340-40-50-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:57f46d2a46c55eba07f078de1ac7178a7211be8dc837d5d6087019f95139a51b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consistent with the overall disclosure objective in paragraph [606-10-50-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-1) and the guidance in paragraphs [606-10-50-2 through 50-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-2) , an entity shall provide the following disclosures of assets recognized from the costs to obtain or fulfill a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") in accordance with paragraphs [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5). ##### [340-40-50-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:5b8c22aa22f04b69126f48360f3d120ff4fc78bc008f705b916af32433467180 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall describe both of the following: 1. a The judgments made in determining the amount of the costs incurred to obtain or fulfill a contract with a customer (in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5)) 2. b The method it uses to determine the amortization for each reporting period. ##### [340-40-50-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-3) Pending content: yes Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:b3f465cca9ffc8a08b56c52f1cc4f5eb0c42ce290fe001905b711b45f9ce923e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose all of the following: 1. a The closing balances of assets recognized from the costs incurred to obtain or fulfill a contract with a customer (in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5)), by main category of asset (for example, costs to obtain contracts with customers, precontract costs, and setup costs) 2. b The amount of amortization and any impairment losses recognized in the reporting period. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [220-40-65-1](https://asc.understandingaccounting.org/asc/220/40/#220-40-65-1)An entity shall disclose all of the following: 1. a The closing balances of assets recognized from the costs incurred to obtain or fulfill a contract with a customer (in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5)), by main category of asset (for example, costs to obtain contracts with customers, precontract costs, and setup costs) 2. b The amount of amortization and any impairment losses recognized in the reporting period. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. ##### [340-40-50-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:10d93c9da35ada169f7362d116f46c11f48a0a22ab8391be0470c3394938e0c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the Securities and Exchange Commission, may elect not to provide the disclosures in paragraphs [340-40-50-2 through 50-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-2) . #### Practical Expedients ##### [340-40-50-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:b1e5e9f91df3caaa56bfdfea23f177ba03ffc25a4718a79990d2eef1da4b48f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity elects to use the practical expedient in paragraph [340-40-25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-4) on the incremental costs of obtaining a contract, the entity shall disclose that fact. ##### [340-40-50-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:25.596Z to 2026-09-09T23:56:25.596Z Record version: sha256:7b44ddac9541cf657185c1f41726396baec480583f2e0b31701e484b8ebb9054 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the Securities and Exchange Commission, may elect not to provide the disclosure in paragraph [340-40-50-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-5). Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:0c7d0d82d79bfe9039f31c4d19378816ee608736751c35a040e31599a5c75016 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/40/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [340-40-55-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:62a0b3351ed81f4e03572244b57aa95868ec0b6c03a4bb4b7792838ec1ba11f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 1 and 2 illustrate the guidance in paragraphs [340-40-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) on incremental costs of obtaining a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."), paragraphs [340-40-25-5 through 25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) on costs to fulfill a contract, and paragraphs [340-40-35-1 through 35-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-1) on amortization and impairment of contract costs. ##### [340-40-55-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:81ff1562deee0ec4e745c08ac77bf502253c118f844bfd757689e81af80821dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a provider of consulting services, wins a competitive bid to provide consulting services to a new [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). The entity incurred the following costs to obtain the contract: - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-91AB95EB-3BDE-4114-A7CE-FF94C7613F4A-low.gif) External legal fees for due diligence " $15,000 " Travel costs to deliver proposal " 25,000 " Commissions to sales employees " 10,000 " Total costs incurred " $50,000 " ##### [340-40-55-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:1f0ff94796a12d209f79e99782c460ef132e1bf9dcbbfb53577501004e9b2c31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1), the entity recognizes an asset for the $10,000 incremental costs of obtaining the contract arising from the commissions to sales employees because the entity expects to recover those costs through future fees for the consulting services. The entity also pays discretionary annual bonuses to sales supervisors based on annual sales targets, overall profitability of the entity, and individual performance evaluations. In accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1), the entity does not recognize an asset for the bonuses paid to sales supervisors because the bonuses are not incremental to obtaining a contract. The amounts are discretionary and are based on other factors, including the profitability of the entity and the individuals' performance. The bonuses are not directly attributable to identifiable contracts. ##### [340-40-55-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:3466bcae3544e9289d328917d25c19e68ffe740fbf901853f477a3c5450fcb73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity observes that the external legal fees and travel costs would have been incurred regardless of whether the contract was obtained. Therefore, in accordance with paragraph [340-40-25-3](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-3), those costs are recognized as expenses when incurred, unless they are within the scope of another Topic, in which case, the guidance in that Topic applies. ##### [340-40-55-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:80ea8b56fe89825d8900b828c2be430010f2a137d3f34b63690986fb65d6a5a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a service contract to manage a customer's information technology data center for five years. The contract is renewable for subsequent one-year periods. The average customer term is seven years. The entity pays an employee a $10,000 sales commission upon the customer signing the contract. Before providing the services, the entity designs and builds a technology platform for the entity's internal use that interfaces with the customer's systems. That platform is not transferred to the customer but will be used to deliver services to the customer. ##### [340-40-55-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:752490852101ceeb5692e2b43d07a212d4900bd00b58d20c8e1037d46341dbcc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1), the entity recognizes an asset for the $10,000 incremental costs of obtaining the contract for the sales commission because the entity expects to recover those costs through future fees for the services to be provided. The entity amortizes the asset over seven years in accordance with paragraph [340-40-35-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-1) because the asset relates to the services transferred to the customer during the contract term of five years and the entity anticipates that the contract will be renewed for two subsequent one-year periods. ##### [340-40-55-7](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:b4bae4215f9319cdd1eb6337bed32f2470e32f83fc656676b7a180c29d45875a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The initial costs incurred to set up the technology platform are as follows: - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-FD4371B8-F07F-4E9E-BDFE-B91DAF1A5149-low.gif) Design services " $40,000 " Hardware " 120,000 " Software " 90,000 " Migration and testing of data center " 100,000 " Total costs " $350,000 " ##### [340-40-55-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:befbf965c13e17363a9516b6e5bbe3ff67fceb96f408a0d61780a1e867461542 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The initial setup costs relate primarily to activities to fulfill the contract but do not transfer goods or services to the customer. The entity accounts for the initial setup costs as follows: 1. a Hardware costs—accounted for in accordance with Topic 360 on property, plant, and equipment 2. b Software costs—accounted for in accordance with Subtopic 350-40 on internal-use software 3. c Costs of the design, migration, and testing of the data center—assessed in accordance with paragraph [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) to determine whether an asset can be recognized for the costs to fulfill the contract. Any resulting asset would be amortized on a systematic basis over the seven-year period (that is, the five-year contract term and two anticipated one-year renewal periods) that the entity expects to provide services related to the data center. ##### [340-40-55-9](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:28.088Z to 2026-09-09T23:56:28.088Z Record version: sha256:db91e7f1c7480416804638cf4fd173c15876b8fabe8076c309119525faf4cfa1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition to the initial costs to set up the technology platform, the entity also assigns two employees who are primarily responsible for providing the service to the customer. Although the costs for these two employees are incurred as part of providing the service to the customer, the entity concludes that the costs do not generate or enhance resources of the entity (see paragraph [340-40-25-5(b)](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5)). Therefore, the costs do not meet the criteria in paragraph [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) and cannot be recognized as an asset using this Topic. In accordance with paragraph [340-40-25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-8), the entity recognizes the payroll expense for these two employees when incurred. Source downloaded (UTC): 2026-09-09T23:56:31.935Z to 2026-09-09T23:56:31.935Z Record version: sha256:147ff7a2e27fdea4048aa8658543e4d9ef6e59e1f1fa08843feda0312e2008d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-40-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/340/40/#60-relationships) SEC content: no #### Revenue from Contracts with Customers ##### [340-40-60-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-60-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:31.935Z to 2026-09-09T23:56:31.935Z Record version: sha256:2debbb1426ba1348147a371f0ff7cf70cc8c82ec263e98eafb6b175de7459917 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), see Topic 606. #### Financial Services—Insurance ##### [340-40-60-2](https://asc.understandingaccounting.org/asc/340/40/#340-40-60-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:31.935Z to 2026-09-09T23:56:31.935Z Record version: sha256:b0947062cae24a373e4956c7c7dedce99bd101d5c197e64fed8a7b387f5206a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance regarding direct response advertising costs, see Subtopic 944-30.