# ASC Topic 340: Other Assets and Deferred Costs Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/340/) 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): 2026-09-09T23:54:15.524Z to 2026-09-10T00:00:06.441Z Record version: sha256:7aed8c70acd7724f3d513828edd6c49cd077f6e256fba59961ffbf7ef7e2d938 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 340 is the Codification's home for "other assets and deferred costs" — items paid or incurred now that are carried as assets and charged to expense later. The Overall subtopic (340-10) covers prepaid expenses classified as current assets and preproduction design and development costs under long-term supply arrangements (expense the product design costs; capitalize tooling costs only when the supplier owns the tools or holds a noncancelable right to use them, or when a contractual guarantee for reimbursement exists), while 340-40 supplies the modern, cross-cutting rule: incremental costs of obtaining a Topic 606 contract and qualifying fulfillment costs are capitalized if recoverable, amortized as the related goods or services transfer, and tested for impairment with no reversal. The remaining subtopics are industry overlays — deposit accounting for insurance contracts lacking risk transfer (340-30), prepaid reinsurance premiums (340-944), music advance royalties and record masters (340-928), broker-dealer exchange memberships and deferred underwriting expenses (340-940), GNMA issuance costs (340-948), health care prepaid physician costs (340-954), time-sharing selling costs (340-978), real estate project and preacquisition costs (340-970), and rate-regulated phase-in plan regulatory assets (340-980). The unifying idea is that deferral is permitted only when future recovery from identifiable future revenue is probable or reasonably expected; where that link was weak, ASU 2014-09 and ASU 2014-10 superseded the old guidance entirely (340-20 advertising, 340-910 contractors, 340-952 franchisors, 340-915 development stage entities). Source downloaded (UTC): 2026-09-09T23:54:15.524Z to 2026-09-09T23:55:04.724Z Record version: sha256:55b3ac3afa2aa0d128c321b097396c7061a3c9f0b04fcce9df5782b03085e575 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10: Other Assets and Deferred Costs — Overall ### Machine-generated study aids ```json { "summary": "ASC 340-10 is the Overall subtopic for Other Assets and Deferred Costs, applicable to all entities. Its substantive guidance is limited to (1) describing prepaid expenses — amounts paid in advance (insurance, interest, rents, taxes, unused royalties, prepaid advertising service, operating supplies) that are used up within the normal operating cycle and classified as current assets — and (2) the recognition rules for preproduction design and development costs incurred under long-term supply arrangements. Costs deferred under other regimes (loan origination costs, internal-use software, environmental costs, broker-dealer and industry costs) are addressed by other Topics cross-referenced in Section 60.", "key_points": [ "Design and development costs for the products themselves to be sold under a long-term supply arrangement shall be expensed as incurred (340-10-25-1).", "Design and development costs for molds, dies, and other tools the supplier will own are capitalized as part of those tools, subject to impairment testing under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10, unless the tools involve new technology, in which case the costs are expensed under Subtopic 730-10 (340-10-25-1).", "Design and development costs for molds, dies, and tools the supplier will not own are capitalized only if the supply arrangement gives the supplier a noncancelable right to use them during the arrangement (while performing); otherwise they are expensed as incurred, including costs incurred before that right is obtained (340-10-25-2).", "Costs that would otherwise be expensed are recognized as an asset as incurred if a contractual guarantee for reimbursement exists — a legally enforceable agreement in which the reimbursement amount can be objectively measured and verified (340-10-25-3); Examples 1-4 at 340-10-55-2 through 55-5 illustrate that per-part pricing arrangements without a measurable reimbursement do not qualify.", "Prepaid expenses are paid in advance of use, are typically consumed within the normal operating cycle, and are classified as current assets (340-10-05-4 through 05-5; see 210-10-45-2).", "The accrue-in-advance (accrual) method of accounting for planned major maintenance activities is prohibited in annual and interim periods (340-10-25-5, referencing 360-10-25-5).", "The Topic applies to all entities (340-10-15-2), and long-term prepaid assets are evaluated under the long-lived asset guidance at 360-10-15-4 through 15-5 (340-10-35-1)." ], "categories": [ "Recognition", "Inventory and PP&E", "Subsequent measurement", "Financial statement presentation" ], "audience_level": "intermediate", "student_note": "The exam trap is assuming all preproduction costs under a supply contract can be deferred: product design and development costs are expensed unless there is a contractual guarantee whose reimbursement amount is objectively measurable and verifiable, and tooling costs are capitalizable only if the supplier owns the tools (non-new-technology) or holds a noncancelable right to use them. Note also that 340-10 is mostly a signpost — specific deferred costs live in other Topics (310-20, 350-40, 340-40, 985-20).", "related_topics": [ "340-40", "360-10", "730-10", "350-40", "310-20", "210-10" ], "key_concepts": [ "prepaid expenses", "preproduction costs", "long-term supply arrangement", "design and development costs", "molds, dies, and other tools", "contractual guarantee of reimbursement", "noncancelable right to use", "planned major maintenance" ] } ``` Source downloaded (UTC): 2026-09-09T23:54:15.524Z to 2026-09-09T23:54:15.524Z Record version: sha256:e254d50de5685d115c8872121d5d250200162cc780ead8e0c701ef1ba649ec7a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/10/#00-status) SEC content: no ##### [340-10-00-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:15.524Z to 2026-09-09T23:54:15.524Z Record version: sha256:b93d5213c6af088d1fa588051ce582673e4e1b8ffe70f59e92fb61013d0af46d 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
340-10-05-1AmendedAccounting Standards Update No. 2014-0905/28/2014
340-10-60-1AmendedAccounting Standards Update No. 2016-0202/25/2016
340-10-60-5SupersededAccounting Standards Update No. 2014-0905/28/2014
340-10-60-6SupersededAccounting Standards Update No. 2014-0905/28/2014
340-10-60-8SupersededAccounting Standards Update No. 2014-0905/28/2014
340-10-60-9SupersededAccounting Standards Update No. 2014-1006/10/2014
340-10-60-15AmendedAccounting Standards Update No. 2013-0806/07/2013
Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:2ea6fe95163d7e35f059305f4b7128844f5a9f19109ba498a1206a9ec23e76fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/10/#05-overview-and-background) SEC content: no ##### [340-10-05-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:0e26ad5a1738152e0119cafe1f74f72e9e5e5690b3a67153d9948455be4f3e6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Other Assets and Deferred Costs Topic includes the following Subtopics: 1. a Overall 2. b [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). 3. c Insurance Contracts That Do Not Transfer Insurance Risk. 4. d [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.") ##### [340-10-05-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:a4ff73ea0ef331222637772240bdd399a61106be880c4a92b5c340808816ca0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Overall Subtopic addresses the accounting and reporting for certain deferred costs and prepaid expenses. The guidance in this Subtopic is limited to a discussion of the nature of prepaid expenses and preproduction costs related to long-term supply arrangements. The specific guidance for many other costs that have been deferred is included in various other financial, broad, and industry Topics. References to certain, but not all, of the guidance in other Topics are included in this Subtopic. #### Deferred Costs Addressed in this Subtopic ##### [340-10-05-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:384b3a6e5ba4ef4e308ace85f73af8b0b3706f52b62055a0d23d5660a8a543ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following provides background regarding certain items included in this Subtopic. ##### [340-10-05-4](https://asc.understandingaccounting.org/asc/340/10/#340-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:4e9fda82cc3dd3db1d3032fee0711f47d21640660dba44cbdc25e4653a46ea11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prepaid expenses are a category of assets that are typically used up or expire within the normal operating cycle of an entity. The term derives from the fact that they are paid in advance of their use or consumption. ##### [340-10-05-5](https://asc.understandingaccounting.org/asc/340/10/#340-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:b9ab128e22612083a263ffeec4c2e7a53aab21e89998f8af468c7e5cbbd667b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prepaid expenses include items such as the following: 1. a Insurance 2. b Interest 3. c Rents 4. d Taxes 5. e Unused royalties 6. f Current paid advertising service not yet received 7. g Operating supplies. ##### [340-10-05-6](https://asc.understandingaccounting.org/asc/340/10/#340-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:18.589Z to 2026-09-09T23:54:18.589Z Record version: sha256:e139d3d6a2d763f202631ab1b7059221273e16d386541a141bae2102376e0271 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Manufacturers often incur preproduction costs related to products they will supply to their customers under long-term supply arrangements. For example, the manufacturer may incur costs to perform certain services related to the design and development of the products it will sell under long-term supply arrangements and may incur costs to design and develop molds, dies, and other tools that will be used in producing those products. While practice varies from industry to industry, the supplier may be contractually guaranteed reimbursement of design and development costs, implicitly guaranteed reimbursement of design and development costs through the pricing of the product or other means, or not guaranteed reimbursement of the design and development costs incurred under the long-term supply arrangement. Source downloaded (UTC): 2026-09-09T23:54:21.591Z to 2026-09-09T23:54:21.591Z Record version: sha256:c067ee0f254256a6602efaea48466c6b9fc606c3ac02ec8bc95d8238900a6a11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-10-15-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:21.591Z to 2026-09-09T23:54:21.591Z Record version: sha256:5e4aa9ef36f6e6035b213c6d9884a72fa875df53dd0e08b7b19b6be807350c23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Scope Section of the Overall Subtopic establishes the pervasive scope for all Subtopics of the Other Assets and Deferred Costs Topic. Unless explicitly addressed within specific Subtopics, the following scope guidance applies to all Subtopics of the Deferred Costs and Other Assets Topic. #### Entities ##### [340-10-15-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:21.591Z to 2026-09-09T23:54:21.591Z Record version: sha256:2916e3e709d9969946c29f5d8c5164c5b74d73315934bd9a34ed3175ae7d09b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Other Assets and Deferred Costs Topic applies to all entities. Source downloaded (UTC): 2026-09-09T23:54:26.698Z to 2026-09-09T23:54:26.698Z Record version: sha256:6906efd262ef7aee64ac270d0f52ddbeac4f4732decc79c96d399e13bb28e46d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/10/#25-recognition) SEC content: no #### Preproduction Costs Related to Long-Term Supply Arrangements ##### [340-10-25-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:26.698Z to 2026-09-09T23:54:26.698Z Record version: sha256:ee85a5ecb6b74c2763ef011902f9e34066a3888f95beb135afe6de6ea27feb24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Design and development costs for products to be sold under long-term supply arrangements shall be expensed as incurred. Design and development costs for molds, dies, and other tools that a supplier will own and that will be used in producing the products under a long-term supply arrangement shall be capitalized as part of the molds, dies, and other tools (subject to an impairment assessment under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10) unless the design and development is for molds, dies, and other tools involving new technology, in which case, the costs shall be expensed as incurred in accordance with Subtopic 730-10. ##### [340-10-25-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:26.698Z to 2026-09-09T23:54:26.698Z Record version: sha256:220ab825452b33bc775aec054ddd62a0de97f625a60d365e38bac9b5fd27934c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Design and development costs for molds, dies, and other tools that a supplier will not own and that will be used in producing the products under the long-term supply arrangement shall be capitalized (subject to an impairment assessment under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10) if the supply arrangement provides the supplier the noncancelable right (as long as the supplier is performing under the terms of the supply arrangement) to use the molds, dies, and other tools during the supply arrangement. Otherwise, those design and development costs shall be expensed as incurred, including costs incurred prior to the supplier's receiving the noncancelable right to use the molds, dies, and other tools during the supply arrangement. ##### [340-10-25-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:26.698Z to 2026-09-09T23:54:26.698Z Record version: sha256:a46705b1b5528201cae8edea3669b4a06fb6685adac672070141d43dc3e42a09 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a contractual guarantee for reimbursement exists for design and development costs that otherwise would be expensed based on the guidance in this Section, those costs shall be recognized as an asset as incurred. For purposes of this Subtopic, contractual guarantee means a legally enforceable agreement in which the amount of reimbursement can be objectively measured and verified. ##### [340-10-25-4](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:26.698Z to 2026-09-09T23:54:26.698Z Record version: sha256:ce602046578f390700ea45c521e35205f995c5232a06d2e755e314e32c664b8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Examples 1 through 4 (paragraphs [340-10-55-2 through 55-5](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-2) ) for preproduction costs related to long-term supply arrangements. #### Planned Major Maintenance Activities ##### [340-10-25-5](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:26.698Z to 2026-09-09T23:54:26.698Z Record version: sha256:60ffb6e9b2c8a525a5c4af58fd9f1a2d38c64b968b2218b64b5990df291e6919 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [360-10-25-5](https://asc.understandingaccounting.org/asc/360/10/#360-10-25-5) states that the use of the accrue-in-advance (accrual) method of accounting for planned major maintenance activities is prohibited in annual and interim financial reporting periods. Source downloaded (UTC): 2026-09-09T23:54:30.703Z to 2026-09-09T23:54:30.703Z Record version: sha256:d7f2fe26813ad8da78488a2673bde5c2c8d8a30fc9f1830271e0d73a3de48934 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/10/#35-subsequent-measurement) SEC content: no ##### [340-10-35-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:30.703Z to 2026-09-09T23:54:30.703Z Record version: sha256:a9f8b2c54c65e33f98990bf0a65a968d875882244ab5c68ab9a3936a1b5be069 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [360-10-15-4 through 15-5](https://asc.understandingaccounting.org/asc/360/10/#360-10-15-4) for a discussion of the applicability of the guidance on long-lived assets to be held and used or disposed of to long-term prepaid assets. Source downloaded (UTC): 2026-09-09T23:54:33.465Z to 2026-09-09T23:54:33.465Z Record version: sha256:628ae6a0691a10bf22ddd5295f71ab94ac3917d8d414138156578cfe6d546d1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/10/#45-other-presentation-matters) SEC content: no #### Classification of Prepaid Expenses ##### [340-10-45-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:33.465Z to 2026-09-09T23:54:33.465Z Record version: sha256:d394100ae4e6ee1f5f1013853de20eacdd9d732ec52a820f0ed07579124cdeba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [210-10-45-2](https://asc.understandingaccounting.org/asc/210/10/#210-10-45-2) for a discussion of how the nature of prepaid expenses results in their classification as current assets. #### Planned Major Maintenance Activities ##### [340-10-45-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:33.465Z to 2026-09-09T23:54:33.465Z Record version: sha256:78ec70ec7475fa8f94d0dd64adb456c0d11fe750b91e40869ad97c03eaaf18e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [360-10-45-1](https://asc.understandingaccounting.org/asc/360/10/#360-10-45-1) and [908-360-45-2](https://asc.understandingaccounting.org/asc/360/908/#360-908-45-2) for a discussion of the consistent application of the method of accounting for planned major maintenance activities. Source downloaded (UTC): 2026-09-09T23:54:35.789Z to 2026-09-09T23:54:35.789Z Record version: sha256:074dbcb089d024fd98e446aa003e8ddee81de9822eb2f9b89391cded6a3cc940 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/10/#55-implementation-guidance-and-illustrations) SEC content: no ##### [340-10-55-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:35.789Z to 2026-09-09T23:54:35.789Z Record version: sha256:1604c9ab3445bf538c7a03ca48804908658943ca455addeeb0a782033e9d733a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [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) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:35.789Z to 2026-09-09T23:54:35.789Z Record version: sha256:7a2ca96e29141f37075d1c3fa1a35cae09b66ddd29fedb73678f82b5a11f3e4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f 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 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) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:35.789Z to 2026-09-09T23:54:35.789Z Record version: sha256:e492d100ab17b43659ed185afdaf263aab7be511d18f7e3a46cf963f5d549d72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f 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 $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) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:35.789Z to 2026-09-09T23:54:35.789Z Record version: sha256:be0030735087fe29b9cf338dc22cba157b8e4822dbf69b470a4b0bfaa6c92839 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f 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 $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) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:35.789Z to 2026-09-09T23:54:35.789Z Record version: sha256:f25cdc611a3e1804897c606c636f80f0e8850f0a2df65ef550520d2d76b21708 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f 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. Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:6214a7e5cc9a9e26d2be9bbbe4dce485fefd4c14273ebcd874d7e501bb011eea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/340/10/#60-relationships) SEC content: no #### Receivables ##### [340-10-60-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:3cefa1549e14f1a7f0aee8272dcbfe4f4e97efe289f20e6611c1a237ded00b10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting for nonrefundable fees and costs associated with lending, committing to lend, or purchasing a group of loans, see Subtopic 310-20. #### Intangibles—Goodwill and Other ##### [340-10-60-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:1db3fbf1fd1bcd4ba4a600a07c767c362beb9d7d7132c605af38ee3949be97a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For capitalization of internal and external costs incurred to develop internal-use computer software, see Sections 350-40-25 and 350-40-30. #### Asset Retirement and Environmental Obligations ##### [340-10-60-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:dc1f9b86aa01bf591a41f79bc652f36e4e09c7c3be35d706e7ba6d38bc8aab21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For capitalization of costs incurred to treat asbestos, see Section 410-30-45 and paragraphs [410-30-25-17 through 25-18](https://asc.understandingaccounting.org/asc/410/30/#410-30-25-17) . ##### [340-10-60-4](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:c8f2b2bd17951227e88cfc7ab45a5ff79f1c5511de94f752fd56c31df6b8594d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting criteria for environmental contamination treatment costs, see paragraphs [410-30-25-16 through 25-19](https://asc.understandingaccounting.org/asc/410/30/#410-30-25-16) . ##### [340-10-60-5](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:371ad06fa8a33a58e237b00d0ad6677e7a0d2c6dc143fc82cb34d242b3a97543 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-10-60-6](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:85b886da58aa74bb7341740d38cd99e4a403461f20e039b4a098a183a488e4d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). #### Other Expenses ##### [340-10-60-7](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:190e458bfe8066d4ff58f8375f494f9e12a7e205fa22b995a4a8c740e3556878 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting for the cost of business process reengineering activities, see Subtopic 720-45. ##### [340-10-60-8](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:0a608d620961c2e48d7ec4beb84e84db8b7950f5fe1a76021ac90be58c4376fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-10-60-9](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:d82673a6c51aaf8a281f35b15c721029602bc74a94ab94161699eb5f6ffefb60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). #### Entertainment—Cable Television ##### [340-10-60-10](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:eb7fe691aa80b04d6ab30a3f85262e816a37b8a92784ef80c1b34a1e026b5a32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For capitalization and subsequent measurement of initial subscriber installation costs, see Section 922-360-35. #### Entertainment—Music ##### [340-10-60-11](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:25c2738c503c94aedb05db36170596b30cc81a4a662e9381545f620ef95dab8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For reporting of an advance royalty to an artist as an asset, see paragraph [928-340-25-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-1). #### Financial Services—Brokers and Dealers ##### [340-10-60-12](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:580b94d5ff2a958a481086bd4e9ba24a625a58899dc5ba47dd6683a85edd3735 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For consideration of a membership as an asset by broker dealers, see Section 940-340-25. ##### [340-10-60-13](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:6c7dcb3ce00bb5e3459fd04051187a1631585e6c9fbbd7a40fc28007622a9406 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting guidance for underwriting expenses by broker dealers, see Sections 940-20-25 and 940-20-35. ##### [340-10-60-14](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:3df861dc2ee1e9b6917dce8d8004052ed5529352072de8481aa140726c541aaf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting guidance for distribution fees by broker dealers, see Subtopic 940-340. #### Financial Services—Investment Companies ##### [340-10-60-15](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:c8a44cd7575f48fde53e02504a9a94ec1ba19ee10eb62caa1834192c269dbe27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting for offering costs by investment companies, see Subtopic 946-20. #### Financial Services—Title Plant ##### [340-10-60-16](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:d2859ceb9936e9312f2ed2c114bd02998501f2cba44b09cb75bb16381840d551 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For capitalization guidance for costs incurred to construct a title plant, see paragraph [950-350-30-1](https://asc.understandingaccounting.org/asc/350/950/#350-950-30-1). #### Software ##### [340-10-60-17](https://asc.understandingaccounting.org/asc/340/10/#340-10-60-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:39.128Z to 2026-09-09T23:54:39.128Z Record version: sha256:3e1b88f08c3778db8827a62ebd1c33345a684ef463e76848f64e632d5ecab8a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting for the costs of computer software to be sold, leased, or otherwise marketed, see Subtopic 985-20. Source downloaded (UTC): 2026-09-09T23:54:45.903Z to 2026-09-09T23:54:45.903Z Record version: sha256:b1f028dda54e17c1e4f05b650b070d70bd887e9f82a7ee01d614086c46b93761 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-00-status) SEC content: yes ##### [340-10-S00-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:45.903Z to 2026-09-09T23:54:45.903Z Record version: sha256:a3a99568c949540160d30989cba599e54f0f06a65707072815a070c9f70d8600 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
340-10-S99-2AmendedAccounting Standards Update No. 2012-0308/27/2012
340-10-S99-2AmendedAccounting Standards Update No. 2010-2208/19/2010
Source downloaded (UTC): 2026-09-09T23:54:48.227Z to 2026-09-09T23:54:48.227Z Record version: sha256:3fefaebc6f762524fa1a4d17efd1b04e6ef4ad392161cd8dea61da1269f8945e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-25-recognition) SEC content: yes #### Expenses Incurred Before the Effective Date of an Offering of Equity Securities ##### [340-10-S25-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:48.227Z to 2026-09-09T23:54:48.227Z Record version: sha256:823a5986e47ade756e4e3fa4aca0e22e8f7fa78b34cbf34070d7a2cc0d5e74dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [340-10-S99-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-1), SAB Topic 5.A, for SEC Staff views on deferral of costs related to an equity offering incurred before the effective date of the offering. Source downloaded (UTC): 2026-09-09T23:54:49.884Z to 2026-09-09T23:54:49.884Z Record version: sha256:6679bf6624038297b8aebbaa725cc1e2321fb45dfb4d58c76002bc08aa4ebb0c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S30: SEC 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-30-initial-measurement) SEC content: yes #### Debt Issue Costs in Conjunction with a Business Combination ##### [340-10-S30-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:49.884Z to 2026-09-09T23:54:49.884Z Record version: sha256:aba87285f991f334f3cad7684dc231f6f9bc447c0bfcf895416f4190e2a61d67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [340-10-S99-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-2), SAB Topic 2.A.6, Question 1, for SEC Staff views on accounting for debt issues costs paid to an investment banker in connection with a business combination. Source downloaded (UTC): 2026-09-09T23:54:51.546Z to 2026-09-09T23:54:51.546Z Record version: sha256:ce6bfc1ca0c75ee0be2c1521922a2d6262fc016680e741448509dc5ceacdeacd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S35: SEC 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-35-subsequent-measurement) SEC content: yes #### Debt Issue Costs in Conjunction with a Business Combination ##### [340-10-S35-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:51.546Z to 2026-09-09T23:54:51.546Z Record version: sha256:a4095b3194c82df802046c5fef70bfc2c2967c7b2157fc11c635a0a3777f2f71 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [340-10-S99-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-2), SAB Topic 2.A.6, Question 1, for SEC Staff views on the amortization of debt issue costs for interim "bridge financing." Source downloaded (UTC): 2026-09-09T23:54:55.217Z to 2026-09-09T23:54:55.217Z Record version: sha256:0fa6f2639ba6da98d2228087592de15b00075f4bc1bebf53d4a69e3a787efb5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S45: SEC 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-45-other-presentation-matters) SEC content: yes #### Balance Sheet Presentation of Deferred Charges ##### [340-10-S45-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:55.217Z to 2026-09-09T23:54:55.217Z Record version: sha256:3e4acf8d75e83d9f78a376b4e424f8e3df2832e731d6e0737674fe6eb3b4a00e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [210-10-S99-1](https://asc.understandingaccounting.org/asc/210/10/#210-10-S99-1), Regulation S-X Rule 5-02.17, for required balance sheet presentation for deferred charges and other assets. Source downloaded (UTC): 2026-09-09T23:54:58.602Z to 2026-09-09T23:54:58.602Z Record version: sha256:66991a5cb3df6c73aa94835c47ba313b2384d485ecc8c9f99f8589ee8b1c4744 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-50-disclosure) SEC content: yes #### Pre-Production Costs Related to Long-Term Supply Agreements ##### [340-10-S50-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:58.602Z to 2026-09-09T23:54:58.602Z Record version: sha256:bc7531133ae9f44bedfc627abe46ecf642e82bb663e1c877b9a6075e5765731d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [340-10-S99-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-3), SEC Observer Comment: Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements, for SEC Staff views on disclosure of accounting policy and other matters pertaining to pre-production design and development costs. ##### [340-10-S50-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-S50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:54:58.602Z to 2026-09-09T23:54:58.602Z Record version: sha256:805e522708d5bd8a47b02a6de91603b1a0ec3b809375058a412c9b92c8e1c39a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [210-10-S99-1](https://asc.understandingaccounting.org/asc/210/10/#210-10-S99-1), Regulation S-X Rule 5-02.17, for the requirement to disclose policy for deferral and amortization of deferred costs. Source downloaded (UTC): 2026-09-09T23:55:04.724Z to 2026-09-09T23:55:04.724Z Record version: sha256:7cb260014a29d9d06fba24329e3c2c29353788851d0fb2c8500fdb1b43b07af0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-10-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/340/10/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [340-10-S99-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:04.724Z to 2026-09-09T23:55:04.724Z Record version: sha256:b20163ac5d676ada1468c80292be4a5b99417acf0520498eaa486ab0c8c5d58b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.A, Expenses of Offering. - Facts: Prior to the effective date of an offering of equity securities, Company Y incurs certain expenses related to the offering. - Question: Should such costs be deferred? - Interpretive Response: Specific incremental costs directly attributable to a proposed or actual offering of securities may properly be deferred and charged against the gross proceeds of the offering. However, management salaries or other general and administrative expenses may not be allocated as costs of the offering and deferred costs of an aborted offering may not be deferred and charged against proceeds of a subsequent offering. A short postponement (up to 90 days) does not represent an aborted offering. ##### [340-10-S99-2](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:04.724Z to 2026-09-09T23:55:04.724Z Record version: sha256:f7bd69ee56bd97204b859632f51ed0e3c4e6dff7f819d72fb71fda86a3428ec5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 2.A.6, Debt Issue Costs in Conjunction with a Business Combination. - Facts: Company A is to acquire the net assets of Company B in a transaction to be accounted for as a business combination. In connection with the transaction, Company A has retained an investment banker to provide advisory services in structuring the acquisition and to provide the necessary financing. It is expected that the acquisition will be financed on an interim basis using "bridge financing" provided by the investment banker. Permanent financing will be arranged at a later date through a debt offering, which will be underwritten by the investment banker. Fees will be paid to the investment banker for the advisory services, the bridge financing and the underwriting of the permanent financing. These services may be billed separately or as a single amount. - Question 1: Should total fees paid to the investment banker for acquisition-related services and the issuance of debt securities be allocated between the services received? - Interpretive Response: Yes. Fees paid to an investment banker in connection with a business combination or asset acquisition, when the investment banker is also providing interim financing or underwriting services, must be allocated between acquisition related services and debt issue costs. - When an investment banker provides services in connection with a business combination or asset acquisition and also provides underwriting services associated with the issuance of debt or equity securities, the total fees incurred by an entity should be allocated between the services received on a relative fair value basis. The objective of the allocation is to ascribe the total fees incurred to the actual services provided by the investment banker. - FASB ASC Topic 805, Business Combinations, provides guidance for the portion of the costs that represent acquisition-related services. The portion of the costs pertaining to the issuance of debt or equity securities should be accounted for in accordance with other applicable GAAP. - Question 2: May the debt issue costs of the interim "bridge financing" be amortized over the anticipated combined life of the bridge and permanent financings? - Interpretive Response: No. Debt issue costs should be amortized by the interest method over the life of the debt to which they relate. Debt issue costs related to the bridge financing should be recognized as interest cost during the estimated interim period preceding the placement of the permanent financing with any unamortized amounts charged to expense if the bridge loan is repaid prior to the expiration of the estimated period. Where the bridged financing consists of increasing rate debt, the guidance issued in FASB ASC Topic 470, Debt, should be followed. FN1 - FN1 As noted in FASB ASC paragraph [470-10-35-2](https://asc.understandingaccounting.org/asc/470/10/#470-10-35-2), the term-extending provisions of the debt instrument should be analyzed to determine whether they constitute an embedded derivative requiring separate accounting in accordance with FASB ASC Topic 815, Derivatives and Hedging. ##### [340-10-S99-3](https://asc.understandingaccounting.org/asc/340/10/#340-10-S99-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:04.724Z to 2026-09-09T23:55:04.724Z Record version: sha256:d103585058bdea9e23626b55fdaac803e047767247d597da1a74e75e6778a212 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Observer Comment: Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements. - Registrants will be expected to disclose their accounting policy for pre-production design and development costs (paragraph [340-10-25-1](https://asc.understandingaccounting.org/asc/340/10/#340-10-25-1)) as well as the aggregate amount of: - a. Assets recognized pursuant to agreements that provide for contractual reimbursement of pre-production design and development costs - b. Assets recognized for molds, dies, and other tools that the supplier owns - c. Assets recognized for molds, dies, and other tools that the supplier does not own. Source downloaded (UTC): 2026-09-09T23:55:08.697Z to 2026-09-09T23:55:37.801Z Record version: sha256:0a5a93a81efb5d19fee2ae8ce24c83273644cb45c6e9a95e17dbad58e06f46a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20: Other Assets and Deferred Costs — Capitalized Advertising Costs ### Machine-generated study aids ```json { "summary": "ASC 340-20 formerly governed capitalized advertising costs (including direct-response advertising) — when such costs could be recorded as assets, how they were measured, amortized, tested for realizability, presented, and disclosed. Every paragraph in the subtopic (Sections 05, 15, 25, 30, 35, 45, 50, 55, and 60) has been superseded by Accounting Standards Update No. 2014-09 (Revenue from Contracts with Customers). The subtopic therefore contains no operative guidance; advertising costs are now expensed as incurred (or the first time the advertising takes place) under ASC 720-35, and contract-related costs are addressed by ASC 340-40.", "key_points": [ "All content of ASC 340-20 was superseded by ASU 2014-09; paragraphs 340-20-05-1 through 340-20-60-1 are marked 'superseded,' and 340-20-05-3 and 05-4 are '[Not used].'", "Because no recognition (Section 25), measurement (Sections 30 and 35), presentation (Section 45), or disclosure (Section 50) guidance remains, an entity cannot look to 340-20 for authoritative support for capitalizing advertising costs.", "The former exception permitting capitalization of direct-response advertising costs no longer exists in GAAP after adoption of ASU 2014-09.", "Advertising costs are now accounted for under ASC 720-35, which requires expensing either as incurred or the first time the advertising takes place.", "Incremental costs of obtaining a contract and costs to fulfill a contract that were once analogized to advertising capitalization are now evaluated under ASC 340-40.", "Entities that had not yet adopted ASU 2014-09 applied the pre-amendment 340-20 guidance; transition is governed by ASC 606-10-65-1." ], "categories": [ "Transition and effective dates", "Recognition", "Subsequent measurement" ], "audience_level": "intermediate", "student_note": "The whole subtopic is a shell — its only exam value is knowing that direct-response advertising capitalization was eliminated by ASU 2014-09. The common mistake is citing 340-20 as live authority for capitalizing advertising; go to ASC 720-35 (expense) or ASC 340-40 (contract costs) instead.", "related_topics": [ "340-40", "720-35", "606-10", "350-40", "944-30" ], "key_concepts": [ "capitalized advertising costs", "direct-response advertising", "superseded guidance", "expense as incurred", "costs to obtain a contract", "transition to asc 606" ] } ``` Source downloaded (UTC): 2026-09-09T23:55:08.697Z to 2026-09-09T23:55:08.697Z Record version: sha256:6aac14cfcccd40b0ad9a3e72402a3a9124eff0d7430abc723698e6c8ac3629dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/20/#00-status) SEC content: no ##### [340-20-00-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:08.697Z to 2026-09-09T23:55:08.697Z Record version: sha256:ed2e0d160aca59a27bec5a866a93c853ec8cb7cf59301b5c7648be81f3ffd5c5 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
340-20-05-1SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-05-2SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-15-1 through 15-4
SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-25-1 through 25-18
SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-30-1SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-30-2SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-35-1 through 35-7
SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-45-1SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-50-1AmendedMaintenance Update 2016-11 (PDF)06/27/2016
340-20-50-1SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-55-1SupersededAccounting Standards Update No. 2014-0905/28/2014
340-20-60-1SupersededAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:55:12.516Z to 2026-09-09T23:55:12.516Z Record version: sha256:03dba2377e73ddb38f5a9d9877a4cd488747a941cee08c083a9c7011d4b38c74 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/20/#05-overview-and-background) SEC content: no ##### [340-20-05-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:12.516Z to 2026-09-09T23:55:12.516Z Record version: sha256:3ecb2a2f390ae10c379ddc33d46963e3d485d18e469697a212f777ce046203dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-05-2](https://asc.understandingaccounting.org/asc/340/20/#340-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:12.516Z to 2026-09-09T23:55:12.516Z Record version: sha256:361c1c2166c71a07acbf03a97b495601f0e83bf533079ac7d64df6319e58ebd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-05-3](https://asc.understandingaccounting.org/asc/340/20/#340-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:12.516Z to 2026-09-09T23:55:12.516Z Record version: sha256:922b5219aaac37fa53020c209b02f86c07638cffdbe6078ffbef2695a994dbe9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. \[Not used\] ##### [340-20-05-4](https://asc.understandingaccounting.org/asc/340/20/#340-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:12.516Z to 2026-09-09T23:55:12.516Z Record version: sha256:794ccaf9b5d6967a8a9941c7a533d658e23d9cb1dee1bbb5d12c0e3e41ae38d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. \[Not used\] Source downloaded (UTC): 2026-09-09T23:55:15.620Z to 2026-09-09T23:55:15.620Z Record version: sha256:45032f3ad38f2424f9c4b9ead510778fb7293b09982cef719f8aa8a847793220 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/20/#15-scope-and-scope-exceptions) SEC content: no ##### [340-20-15-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:15.620Z to 2026-09-09T23:55:15.620Z Record version: sha256:ec149fd59d81fada2cb2dcdd0aa76b4b3a89f01133ce93adedb2043660ec3061 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-15-2](https://asc.understandingaccounting.org/asc/340/20/#340-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:15.620Z to 2026-09-09T23:55:15.620Z Record version: sha256:d1f9fd7ebc8877cc3870a6ce27449d62f60a18ee81fef0e192c0e37d6f4312bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-15-3](https://asc.understandingaccounting.org/asc/340/20/#340-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:15.620Z to 2026-09-09T23:55:15.620Z Record version: sha256:75cdf92f70b3a50bda08a8c5423887584564967e44324e2b52f76e2ef470fb1e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-15-4](https://asc.understandingaccounting.org/asc/340/20/#340-20-15-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:15.620Z to 2026-09-09T23:55:15.620Z Record version: sha256:87a4b747e03fe7dbc596eecd454b05f7c45e703bbf8c913acf9cda202eb54c3a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:19f5dd36b053736a322892f0a56e8768348b2e2717b6ac292844bbd6be3db60b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/20/#25-recognition) SEC content: no ##### [340-20-25-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:fd764b57744e0ad1e2c062121700100757fda5ba424782d4141721dc11cb16eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-2](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:a64fd889099bce77723499d6933da3ed02743cf4e323871fa61c4007cdd73ad0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-3](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:c1ae53c3ceb3bbad87fa6021f47c9b36f4c8d68472fa39cc9dcad57f6cb64887 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-4](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:96adba3bf2660bc7a2759a2ebaeb6e26bcad522b1aee32c90c2e53d18bec8cfa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-5](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:6e6fd2f0920b62670b564788719f5788cd5efd3e850619d2ddd1182f81999141 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-6](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:14123c254d96e750f666b48c03f472fe23fcae6cbc9017f9ce0dd438b4ba3185 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-7](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:5b3ad33f4acee812dc93d986ac2ed5f2c2502afeb9b14a43cdc1a281dace4bc9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-8](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:1db5d128ff9bc4e001f3b17a528a1d68e8b8315d8fc3c6aeedcd62ddf4375de9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-9](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:45ec2d1f557cfe8d872c85c8bde8218c21aef87bb1537a5e2717519c00dac029 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-10](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:fc74952b9bf88545bfd85de737f7b3198b3cfebfe1430356b6cdaf56bfb94943 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-11](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:1851c5b887e9ab13d129779efc67fe97ed24e2bf5fbd70c78a31bc1e1cca8799 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-12](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:09f98ed937d8302b75c4aba1c0922b2160c96212436259e89d8edde9152985b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-13](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:3b3eca7c57cafcb1abd7bc9d1423f1a9ab3bac728a3cddac3cc83820fe46ae61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-14](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:88d4205621779af8baae322217bca672cb338ebda6d030d480405e7ae397a34e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-15](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:aecd6fb53e2b5ac6e40e0de657c29a6e9d3865effe44d3734fa8556ef07c7510 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-16](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:fb03a8c70933c6c5eb33b0671277f5344c42b17ed0849be859a2c4da36fb3e27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-17](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:872ace039451de196d7b79b840abdff1578bfd297047e3e095aadeaf8fa6ec64 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-25-18](https://asc.understandingaccounting.org/asc/340/20/#340-20-25-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:17.509Z to 2026-09-09T23:55:17.509Z Record version: sha256:63e414d0bc4f334f934f005ba420a0fa49ae38ed4876794e30369b0f46096593 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:20.537Z to 2026-09-09T23:55:20.537Z Record version: sha256:18614d3e22c7ff63373637a9d39993a78a5eddcfd37a2e3cc4e8cd99fb17e2cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/340/20/#30-initial-measurement) SEC content: no ##### [340-20-30-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:20.537Z to 2026-09-09T23:55:20.537Z Record version: sha256:31d3911f2fd44f5928b9813b6f6a980490405487a88e59509be085bd0d240c64 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-30-2](https://asc.understandingaccounting.org/asc/340/20/#340-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:20.537Z to 2026-09-09T23:55:20.537Z Record version: sha256:4b938a2c194315e2e05c264934bd5b5082539ba53095f8ba406a93f6cd8dae2c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:238259a871aa519421584cad78c72a0ecf0fdb9985f13e2b5acfbe509133d1e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/20/#35-subsequent-measurement) SEC content: no ##### [340-20-35-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:a580a84ce462f6acb594dd66dd7d74eb682f8d0141ad7133f820f5f8d8b656fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-35-2](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:2d81c2a68b493b7e6344130592e4a39964c7602ffa09a9c5e59bfa96abac3a8b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-35-3](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:ae7a7ca5e157a3fdc95e1361e9be19e0dcdf33d6a2e7544136d6bf2a7512d395 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-35-4](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:8aa0740b1b034cf417a5b10743d18fab4cb42d757591249dff7f7dc5ef6630e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-35-5](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:596f66221ea89c50ecfbaadb697243e973fbaff1b89e81e7302c1c7514ac8a48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-35-6](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:ec72a3fefaa201f544edd07024c8a72051e0d9fafa74657dbd58af597d84764d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-20-35-7](https://asc.understandingaccounting.org/asc/340/20/#340-20-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:22.344Z to 2026-09-09T23:55:22.344Z Record version: sha256:9c13b4fbb75fe0229b5e45510557c9d93c730b9a4a4b5cb40c2ae4cb36648562 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:25.427Z to 2026-09-09T23:55:25.427Z Record version: sha256:f65a20098d06522dd73352fb4cd709c91134ac451b3c11c6f06f9ad722b7469a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/20/#45-other-presentation-matters) SEC content: no ##### [340-20-45-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:25.427Z to 2026-09-09T23:55:25.427Z Record version: sha256:363ab37b2114d93778f1d0a2c080cb9b6ae5c4907d2c5787e620a23a8a05d092 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:29.160Z to 2026-09-09T23:55:29.160Z Record version: sha256:132dbcf8d5b8161e676103ae0c7d91817b67faf0304a02c696701a7e20dc75c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/20/#50-disclosure) SEC content: no ##### [340-20-50-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:29.160Z to 2026-09-09T23:55:29.160Z Record version: sha256:30853db565e672e0b38908efa73cbd6697d660806b4f6cd26e4d2c97f3f11afc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:31.506Z to 2026-09-09T23:55:31.506Z Record version: sha256:9d69abbcd1e4ea33ff114f73868045c8d9b8bb82fbe0440680c6954527932200 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/20/#55-implementation-guidance-and-illustrations) SEC content: no ##### [340-20-55-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:31.506Z to 2026-09-09T23:55:31.506Z Record version: sha256:7700c467b5afb5a9b7e706acdac6a9aa7a31406f221346e3bff894d3b8466e80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:35.169Z to 2026-09-09T23:55:35.169Z Record version: sha256:3cbb60e23fa122f3f4ce32f01f8a7624851c0514d55da7833e47904d8b3c00db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-20-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/340/20/#60-relationships) SEC content: no ##### [340-20-60-1](https://asc.understandingaccounting.org/asc/340/20/#340-20-60-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:35.169Z to 2026-09-09T23:55:35.169Z Record version: sha256:d90133cf85b1bde1a8e750b94c9ffb8de93b0f825f19c9c565bb6a3b4d3c6394 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:55:41.723Z to 2026-09-09T23:56:05.098Z Record version: sha256:df8046fcc671374c2c9ddf417fb584d1681838552b8674e24fbe96cc2ec09ed4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30: Other Assets and Deferred Costs — Insurance Contracts That Do Not Transfer Insurance Risk ### Machine-generated study aids ```json { "summary": "ASC 340-30 tells you how to apply the deposit method of accounting to insurance and reinsurance contracts that fail to transfer insurance risk (which requires transfer of both timing risk and underwriting risk). At inception a deposit asset or liability is recognized at consideration paid or received less explicitly identified premiums or fees retained (340-30-25-1; 340-30-30-1). Subsequent measurement depends on which of four risk categories the contract falls into: effective-yield/interest-method accretion for timing-risk-only or no-risk contracts, unexpired-coverage plus present value of expected recoveries for underwriting-risk-only contracts, and the open-year method for indeterminate-risk contracts.", "key_points": [ "Insurance risk transfer requires both timing risk and underwriting risk, producing four deposit categories: timing risk only, underwriting risk only, neither, or indeterminate risk (340-30-05-2).", "A deposit asset or liability is recognized at inception and measured at the consideration paid or received less any explicitly identified premiums or fees retained by the insurer or reinsurer, irrespective of contract experience (340-30-25-1; 340-30-30-1).", "For contracts transferring only significant timing risk or neither risk, the deposit is adjusted each reporting date using the effective yield on estimated cash flows (interest method, consistent with 310-20 and 835-30), with a corresponding credit or charge to interest income or expense (340-30-35-1 through 35-3; 340-30-45-2).", "If cash flow estimates change, the effective yield is recalculated retrospectively and the deposit is adjusted to the amount that would have existed had the new yield applied since inception (340-30-35-3); a significant change may signal that significant underwriting risk exists, requiring conversion to that model (340-30-35-4).", "For contracts transferring only significant underwriting risk, the deposit equals the unexpired portion of coverage until a reimbursable loss is incurred, then the present value of expected future cash flows plus remaining unexpired coverage (340-30-35-5), discounted at the current rate on U.S. government obligations with similar cash-flow characteristics (adjusted for default risk only by the insured/ceding entity), locked in at each loss date (340-30-35-6).", "Contracts with indeterminate risk follow the open-year method: effects are excluded from net income and aggregated on the balance sheet until premiums can be reasonably estimated and allocated, but the method cannot defer losses recognizable under Subtopic 450-20 (340-30-25-3 through 25-5); reclassification is a change in accounting estimate under Topic 250 (340-30-25-6 through 25-7).", "Deposit assets and liabilities are reported gross unless a right of offset exists under Subtopic 210-20, and entities must disclose a description of the contracts plus separate totals of deposit assets and deposit liabilities (340-30-45-1; 340-30-50-1)." ], "categories": [ "Recognition", "Initial measurement", "Subsequent measurement", "Industry-specific" ], "audience_level": "advanced", "student_note": "This is the \"failed reinsurance\" bucket: if a contract does not shift both timing and underwriting risk, no premium/loss accounting is allowed and the arrangement is booked like a financing (deposit) with interest. The common mistake is assuming one accounting model applies to all deposits — the measurement rule differs sharply between timing-risk-only contracts (effective yield) and underwriting-risk-only contracts (unexpired coverage plus discounted expected recoveries).", "related_topics": [ "944-20", "944-605", "720-20", "310-20", "835-30", "210-20" ], "key_concepts": [ "deposit method of accounting", "insurance risk transfer", "timing risk", "underwriting risk", "indeterminate risk", "open-year method", "effective yield / interest method", "unexpired portion of coverage" ] } ``` Source downloaded (UTC): 2026-09-09T23:55:41.723Z to 2026-09-09T23:55:41.723Z Record version: sha256:7dabf92dd9c70b6d2dab2e15fc13827cf9e52e69b35dcbcc493a182ccbb45165 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/30/#00-status) SEC content: no ##### [340-30-00-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:41.723Z to 2026-09-09T23:55:41.723Z Record version: sha256:03a7c80f2668084e362ff4aad71858ec09fa02bc871a5d14360088800a4c12a8 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
ReinsuranceAddedAccounting Standards Update No. 2016-1912/14/2016
340-30-15-2AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-25-1AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-35-1AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-45-3AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-50-2AmendedAccounting Standards Update No. 2024-0311/04/2024
340-30-50-2AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-55-2AmendedAccounting Standards Update No. 2016-1912/14/2016
Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:ce695ac0fe9c13b2dedc982b53252e1183dddf1084c69e5161ff4268e7f4c703 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/30/#05-overview-and-background) SEC content: no ##### [340-30-05-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:a691ab5b05e0ce315109bc43cf3572bc7386e89304834c02c7f8c41e853cde8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on how to apply the deposit method of accounting when it is required for insurance and reinsurance contracts that do not transfer [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured."). These contracts may be prospective or retroactive in nature. ##### [340-30-05-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:96a233ca5e2d988229ee2eda9af672b8e4c8574613660ed497092cfd65ac2347 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The transfer of insurance risk requires transferring both [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") and [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). Therefore, four possible categories for deposit arrangements have been identified as follows: 1. a An insurance or reinsurance contract that transfers only significant timing risk. 2. b An insurance or reinsurance contract that transfers only significant underwriting risk. 3. c An insurance or reinsurance contract that transfers neither significant timing nor significant underwriting risk. 4. d An insurance or reinsurance contract with an indeterminate risk. #### An Insurance or Reinsurance Contract that Transfers Only Significant Timing Risk ##### [340-30-05-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:7dd23d36c84f03cb32fd74375883dbe6acce65feff02caa1c25710ac97d4e451 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an insurance or reinsurance contract to be considered to have transferred significant timing risk, the timing of the loss reimbursement under the contract must be based on the timing of the loss event. ##### [340-30-05-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:d6372ba1e80077df0e7b05a95f17e4655bfe08cbce2157987d6215928e07aa5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The timing of the loss reimbursement under an insurance contract would be based on the timing of the payment with respect to the loss event. For reinsurance contracts, the timing of the loss reimbursement under the contract would be based on the timing of payment by the insured (reinsured) of the underlying loss, as well as when recovery is expected from the reinsurer. ##### [340-30-05-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:55de193a8394b938b5b23516b52c64580fc9ac6ef1a753dd7949d108ae502f4c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance or reinsurance contract that transfers only significant timing risk limits the amount of underwriting risk to which the insurer or reinsurer is subject and is commonly entered into by the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") to provide liquidity. These limitations may result in an insufficient transfer of insurance risk. For example, insurance and reinsurance contracts that provide for [experience adjustments](https://asc.understandingaccounting.org/glossary/e/#experience-adjustment "A provision in an insurance or reinsurance contract that modifies the premium, coverage, commission, or a combination of the three, in whole or in part, based on experience under the contract.") may indicate that a sufficient amount of underwriting risk has not been transferred. The recovery of the amount of the initial deposit for a contract that transfers only significant timing risk is not substantially dependent on future loss experience of the insured. #### An Insurance or Reinsurance Contract that Transfers Only Significant Underwriting Risk ##### [340-30-05-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:b60ad1dd2304bbc1dfe2a3cbe871e4a01229e863f1324b103e6ec9857c24eef1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an insurance or reinsurance contract to be considered to have transferred significant underwriting risk, the probability of a significant variation in the amount of payments under the insurance or reinsurance contract must be more than remote. Such variation must also result from variation in the insured's losses, and it must be at least reasonably possible that the insurer will realize a significant loss from the transaction. An insurance or reinsurance contract that transfers only significant underwriting risk may be entered into to lessen the overall economic risks associated with the contract and permit a greater amount of coverage than would otherwise be obtainable for a comparable premium. Features in insurance or reinsurance contracts that transfer only significant underwriting risk limit the uncertainties about the timing of the receipt and payment of cash flow, thus limiting the amount of timing risk assumed by the insurer. A delayed reimbursement of losses by the insurer is a possible indication that timing risk has not been transferred. Unlike insurance and reinsurance contracts that transfer only significant timing risk, the recovery of the amount of the initial deposit for an insurance or reinsurance contract that transfers only significant underwriting risk is substantially dependent on the future loss experience of the insured. Depending on such experience, the initial deposit may be recovered or the recovery may be significantly more or less than the original deposit. #### An Insurance or Reinsurance Contract that Transfers Neither Significant Timing nor Significant Underwriting Risk ##### [340-30-05-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:dc1294868d46212d09fa1e67105c6a9e63402f16216cf02c96912848ce058504 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance and reinsurance contracts that transfer neither significant timing nor significant underwriting risk are expected to be rare. #### An Insurance or Reinsurance Contract with an Indeterminate Risk ##### [340-30-05-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:56c2b5993d508606e693e52bb73922929da5fffd2fc0950354810eeb3100c9dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. These insurance and reinsurance contracts have uncertain terms, or there is insufficient information to reasonably estimate and allocate premiums in proportion to the protection provided. For example, certain insurance and reinsurance contracts allow the insured to obtain some degree of coverage for multiple years without exposing the insurer to a defined level of insurance risk each year. Uncertainties surrounding these insurance and reinsurance contracts are analogous to those often associated with foreign property and liability reinsurance as addressed in the Reinsurance Contracts Subsections of Subtopic 944-605. Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:2c1ff41de22200eaeef741dc1c55f32a1790c139cc23722a49e6fba8341a4b87 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/30/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-30-15-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:5767da048775af227b5be316af41d8ebfa4f62e65014d4d499840e7a8bd4bd2b 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. #### Entities ##### [340-30-15-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:92b64b664abdaa294ec6b34c8113e20d0863f680e5f121178cbbccfed90a8212 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following entities: 1. a The insured and the insurer in an insurance contract 2. b The [ceding](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") and [assuming entity](https://asc.understandingaccounting.org/glossary/a/#assuming-entity "The party that receives a reinsurance premium in a reinsurance transaction. The assuming entity (or reinsurer) accepts an obligation to reimburse a ceding entity under the terms of the reinsurance contract.") in a [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract. #### Transactions ##### [340-30-15-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:7bf478833c370daa041f86e5472135904256f1bbb328e7aa354ec83d2505b8cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following kinds of insurance and reinsurance contracts: 1. a Short-duration insurance and reinsurance contracts that do not transfer [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured.") as described in paragraph [720-20-25-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-1) and, for reinsurance contracts, as described in Section 944-20-15 2. b Multiple-year insurance and reinsurance contracts that do not transfer insurance risk or for which insurance risk transfer is not determinable. ##### [340-30-15-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:85b173719eaba5641968e031ca31765c76bd5a1680202247c31f2da83522b4bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Long-duration life and health insurance contracts that do not indemnify against mortality or morbidity risk shall be accounted for as investment contracts under Topic 944. Therefore, such contracts are not covered by this Subtopic. Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:b20d616f7e2caadf6fd02425c2c15c5bf422495eb27f12cca87104a9b61725f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/30/#25-recognition) SEC content: no #### Deposit Asset or Liability Relating to Insurance and Reinsurance Contracts Accounted for Under Deposit Accounting ##### [340-30-25-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:69695d83180478d03c16cf134d8418eee2d86cc105c237c806a1ef099eb896b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At inception, a deposit asset or liability shall be recognized for insurance and [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts accounted for under deposit accounting. ##### [340-30-25-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:0a18d203c60320765bd781633379445e4cc3ab79c685ea8aa7d77c983301f5b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Sections 340-30-30 and 340-30-35 for guidance relating to the measurement of insurance and reinsurance contracts that transfer: 1. a Only significant [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") 2. b Neither significant timing nor significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") 3. c Only significant underwriting risk. #### Insurance and Reinsurance Contracts with Indeterminate Risk ##### [340-30-25-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:29909af9d8ad88328a6504ac1f7dcff15303e5d962d0ff0df32ecb6cda131a4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Uncertainties surrounding insurance and reinsurance contracts with indeterminate risk are analogous to those often associated with foreign property and liability reinsurance as addressed in the Reinsurance Contracts Subsections of Subtopic 944-605. As a result, that guidance regarding the open-year method shall be followed. ##### [340-30-25-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:63a9e67fe3838fbdda0b9a5db87b1abda428068c41b69ed9d8e164b3cb8b4ba8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the open-year method, the effects of the contracts are not included in the determination of net income until sufficient information becomes available to reasonably estimate and allocate premiums. The open-year method requires that these effects be aggregated in the balance sheet. ##### [340-30-25-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:daca401161c682f22b405ba2eb72d1d4da7586eeecbdfa692a6563ee3c7afe90 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The open-year method shall not, however, be used to defer losses that otherwise would be recognized pursuant to Subtopic 450-20. ##### [340-30-25-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:604c960910b49aa21ad4c4701034ebb0e913797cb5a786e318a70856cf137ad7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If sufficient information becomes available to reasonably estimate and allocate premiums, the insurance or reinsurance contract with indeterminate risk shall be reclassified into one of the three following categories, as appropriate, and accounted for accordingly: 1. a Transfers that have neither significant timing nor significant underwriting risk 2. b Transfers that have only significant timing risk 3. c Transfers that have only significant underwriting risk. ##### [340-30-25-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:d2257de6bec56f83c62c13d9b5332c988213a6160a3b594388ed202596b4023a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The change in deposit assets or liabilities that result if sufficient information becomes available is treated as a change in accounting estimate in accordance with Topic 250. #### Short-Duration Reinsurance Contracts ##### [340-30-25-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:b63886d44616b22ffe1a80eef833a8f28dbc7487c894783fff8b86136e96406b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a short-duration reinsurance contract does not meet either the condition in paragraph [944-20-15-41](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-41) or the exception in paragraph [944-20-15-53](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-53) but transfers significant [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured."), then the accounting for contracts that transfer only significant underwriting risk shall be followed as discussed in paragraphs [340-30-35-5 through 35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-5) and [340-30-45-3 through 45-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-3) . Source downloaded (UTC): 2026-09-09T23:55:53.141Z to 2026-09-09T23:55:53.141Z Record version: sha256:7c926440a5a0d63b241de5ec36a3f27b4b05243504161ad035cace6834b4918d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/340/30/#30-initial-measurement) SEC content: no #### Deposit Asset or Liability Related to Insurance and Reinsurance Contracts Accounted for Under Deposit Accounting ##### [340-30-30-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:53.141Z to 2026-09-09T23:55:53.141Z Record version: sha256:3ea607d73aae4d8100db981de234124058236c13eb805322f17dc144de4905a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At inception, a deposit asset or liability shall be measured based on the consideration paid or received, less any explicitly identified premiums or fees to be retained by the insurer or reinsurer, irrespective of the experience of the contract. Accounting for such fees shall be based on the terms of the contract. Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:737c9d6f4448ee54ac1f39fd1e32513e0083320fb5d2cdbda01f6f14a3081e62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/30/#35-subsequent-measurement) SEC content: no #### Insurance and Reinsurance Contracts that Transfer Only Significant Timing Risk and Insurance and Reinsurance Contracts that Transfer Neither Significant Timing nor Significant Underwriting Risk ##### [340-30-35-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:0df4f760c9967370531a730966121dc9d1bdac6bcdcc9ce64a398ca59c11196b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For insurance and [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts that transfer only significant [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") or that transfer neither significant timing nor significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."), the amount of the deposit asset or liability shall be adjusted at subsequent reporting dates by calculating the effective yield on the deposit to reflect actual payments to date and expected future payments (as discussed in paragraph [340-30-35-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-3)), with a corresponding credit or charge to interest income or expense (see Examples 1 through 3 \[paragraphs [340-30-55-2 through 55-7\])](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-2)). ##### [340-30-35-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:1498695bf8001dca6dd3497c02d9e16ed9f2bec96c165f69356a446ca9eaf2ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This approach is consistent with the interest method described in Subtopics 310-20 and 835-30. ##### [340-30-35-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:db765bf634db2a6c39180631fc7b8add6a8bb480eafbb9c45dc34102214ca1bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The calculation of the effective yield shall use the estimated amount and timing of cash flows. Consistent with paragraph [310-20-35-26](https://asc.understandingaccounting.org/asc/310/20/#310-20-35-26), if a change in the actual or estimated timing or amount of cash flows occurs, the effective yield shall be recalculated to reflect the revised actual or estimated cash flows. The deposit shall be adjusted to the amount that would have existed at the balance-sheet date had the new effective yield been applied since the inception of the insurance or reinsurance contract. ##### [340-30-35-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:9007401af283d43e3c4b61165a5ab0be18c4b78fdf1c48e5afccc1755b2e0eb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Significant changes in the expected amounts of aggregate cash flows are expected to occur infrequently because of the nature of these kinds of contracts. Should a significant change occur in the total amount of actual or estimated cash flows, the entity shall determine whether the change indicates that the contract does include significant underwriting risk and therefore shall be converted to the accounting for contracts that transfer only significant underwriting risk (see paragraphs [340-30-35-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-5) and [340-30-45-3 through 45-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-3) ). In addition, a contract that transfers only significant timing risk, which subsequently is determined also to transfer significant underwriting risk, cannot be accounted for under insurance or reinsurance accounting when the revised determination is made. #### Insurance and Reinsurance Contracts that Transfer Only Significant Underwriting Risk ##### [340-30-35-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:94f9a2bdf309c3bc53db232b081d67dc78543db333efa24f36f3bed11e6639eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Until such time as a loss is incurred that will be reimbursed under an insurance or reinsurance contract that transfers only significant underwriting risk, the deposit shall be measured based on the unexpired portion of the coverage provided. Once a loss is incurred that will be reimbursed under such a contract, then the deposit shall be measured by the present value of the expected future cash flows arising from the contract plus the remaining unexpired portion of the coverage provided (see Example 4 \[paragraph [340-30-55-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-8)\]). #### Insurance and Reinsurance Contracts that Transfer Only Significant Underwriting Risk—Discount Rate ##### [340-30-35-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:9c71c7c06ba5380f85aba9715f919e96e795108b47dae10a81bed6cb505d4617 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract."), the discount rate used to determine the deposit asset shall be the current rate on U.S. government obligations with similar cash-flow characteristics, adjusted for default risk. Consideration of the default risk, if any, shall be based on the assessment of the creditworthiness of the insurer. For the insurer or [assuming entity](https://asc.understandingaccounting.org/glossary/a/#assuming-entity "The party that receives a reinsurance premium in a reinsurance transaction. The assuming entity (or reinsurer) accepts an obligation to reimburse a ceding entity under the terms of the reinsurance contract."), the discount rate used to determine the deposit liability shall be the current rate on U.S. government obligations with similar cash-flow characteristics. These rates shall be established at the date of each loss incurred and used for the remaining life of the contract and shall not be changed. ##### [340-30-35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:2cf974a7f0578579e3230bea9188ae2cced274fa6ec08feededa04c9f4eccc1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If numerous losses occur, the use of average rates is permitted because establishing individual rates might require detailed record keeping and computations that could be burdensome and unnecessary to produce reasonable approximations of the results. Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:a52d0f75aba08cbca1d280412abb535a10f2ce4ed6dda17e866f7011523aeae1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/30/#45-other-presentation-matters) SEC content: no #### Deposit Asset and Liability ##### [340-30-45-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:20c21e10ab24caf5499fbcdef06e04e3ce5b516534e5d2b390618bd2472891a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Deposit assets and liabilities shall be reported on a gross basis, unless the right of offset exists as defined in Subtopic 210-20. The accounting by the insured and insurer are symmetrical, except as noted in paragraphs [340-30-35-6 through 35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-6) . #### Insurance and Reinsurance Contracts that Transfer Only Significant Timing Risk and Insurance and Reinsurance Contracts that Transfer Neither Timing nor Significant Underwriting Risk ##### [340-30-45-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:03b1b01cf993a6efde6ee0fcb29fe1e62c68152201f7eebf422c5a5103f9b6ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in the carrying amount of the deposit shall be reported as interest income or interest expense. #### Insurance and Reinsurance Contracts that Transfer Only Significant Underwriting Risk ##### [340-30-45-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:1eafb3d39b019ca11bed8114427713ae56413ac8b66749bb54fd2ad7e524916c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in the recorded amount of the deposit, other than the unexpired portion of the coverage provided, arising from an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers only significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") shall be recorded in an insured's income statement as an offset against the loss recorded by the insured that will be reimbursed under the insurance or reinsurance contract and in an insurer's income statement as an incurred loss. ##### [340-30-45-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:2ca6ba142f60cb4f0719ce5ede2cc0920977648a298c61c8778f460924e11657 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities shall record the reduction in the deposit related to the unexpired portion of the coverage provided as an adjustment to incurred losses. ##### [340-30-45-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:2db9f64e4fab075b64853a18e0278fe122053a773f8fd65f6a2829a56f7a92ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the insured is an entity other than an insurance entity, the reduction in the deposit related to the unexpired portion of the coverage provided shall be recorded as an expense. Source downloaded (UTC): 2026-09-09T23:56:00.194Z to 2026-09-09T23:56:00.194Z Record version: sha256:5f867f8f9543c2bf717823ec8d0d2d266712c27e9864bffa9095a30245eb2f1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/30/#50-disclosure) SEC content: no #### Deposit Asset or Liability ##### [340-30-50-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:00.194Z to 2026-09-09T23:56:00.194Z Record version: sha256:4f974440b89b3a876c954f61b7e4684c27f41b57e862e368066968413fca3d73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities shall disclose a description of the contracts accounted for as deposits and the separate amounts of total deposit assets and total deposit liabilities reported in the statement of financial position. #### Insurance and Reinsurance Contracts that Transfer Only Underwriting Risk ##### [340-30-50-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-50-2) Pending content: yes Source downloaded (UTC): 2026-09-09T23:56:00.194Z to 2026-09-09T23:56:00.194Z Record version: sha256:38121865683cf3af42bf0581f5f3221a0fc19a982eac803b452d75397a3aabb2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities shall disclose the following information regarding the changes in the recorded amount of the deposit arising from an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers only significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."): 1. a The present values of initial expected recoveries that will be reimbursed under the insurance or reinsurance contracts that have been recorded as an adjustment to incurred losses 2. b Any adjustment of amounts initially recognized for expected recoveries. The individual components of the adjustment (meaning, interest accrual, the present value of additional expected recoveries, and the present value of reductions in expected recoveries) shall be disclosed separately. 3. c The amortization expense attributable to the expiration of coverage provided under the contract. 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)Insurance entities shall disclose the following information regarding the changes in the recorded amount of the deposit arising from an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers only significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."): 1. a The present values of initial expected recoveries that will be reimbursed under the insurance or reinsurance contracts that have been recorded as an adjustment to incurred losses 2. b Any adjustment of amounts initially recognized for expected recoveries. The individual components of the adjustment (meaning, interest accrual, the present value of additional expected recoveries, and the present value of reductions in expected recoveries) shall be disclosed separately. 3. c The amortization expense attributable to the expiration of coverage provided under the contract. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:fec48753bb22912c449760d142461cd97e816d75bfd05be2f33e326695a3b1cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [340-30-55-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:116aad16b7d09bd2557ef8e7216e139fc9a6346a36fdff3cfcca503628313c07 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Examples illustrate the application of the guidance in this Subtopic. It shall not be construed that any aspect of the illustrations establishes or changes requirements as to when deposit accounting should be applied. Rather, the Examples illustrate how deposit accounting is to be applied when it is determined that it should be applied under other accounting literature. These Examples illustrate the accounting by the insured. The accounting by the insurer would be symmetrical, except as noted in paragraphs [340-30-35-6 through 35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-6) . ##### [340-30-55-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:7012fb8c2b1a98b7d322846442d0e9edfc2f3fa7784fdf63cb50e67f3797c9ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting by the insured for an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers neither significant timing nor significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). The facts are as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-86A135AC-0683-4C02-8865-0A9DDAC1C957-low.gif) Premium "$1,000 " Coverage period 1 year Expected recoveries $250 at the end of each year for 5 years Implicit interest rate 8 percent (a) (a) "Present value of $250 per year for 5 years at 8 percent = $1,000." ##### [340-30-55-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:70a6d350c02050b70fd68076a02558b09cfe5db68b812117ec74db89b4e35142 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the insured records a $1,000 asset. Changes in the amount or timing of cash flows are not anticipated. As they are received, cash recoveries reduce the carrying amount of the deposit, and the carrying amount of the deposit is increased at each reporting date by the amount of the interest earned during the period. The Example assumes that the entity is reporting related financial information as of the end of each year, as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-F0299C64-D9D5-4BAB-8006-5DA35744FBA9-low.gif) Description 8 Percent Interest Income Cash Recoveries Deposit Balance Initial payment " $1,000 " Year 1 $80 " 1,080 " End of Year 1 $(250) 830 Year 2 66 896 End of Year 2 (250) 646 Year 3 52 698 End of Year 3 (250) 448 Year 4 36 484 End of Year 4 (250) 234 Year 5 16 250 End of Year 5 (250) - Totals $250 " $(1,250)" $- ##### [340-30-55-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:5d615074a4459d74517af9e8db02a0722a605386563ca97f5020a6a32bbc8a0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting by the insured for an insurance or reinsurance contract that transfers only significant [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). The facts are as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-94C9B8F7-A296-4CA5-8209-330EAFD2FB7C-low.gif) Premium "$1,000 " Coverage period 1 year Initial expected recoveries $225 per year (at end of year) for 5 years Initial implicit rate 4 percent (a) (a) "Present value of $225 per year for 5 years at 4 percent = $1,000." ##### [340-30-55-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:2e3d5f192d6c54e8aac50d3abf58fd06d78d850ecca37e56a0be8257ba29f8a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implicit rate often will be less than the current risk-free rate because of the uncertainties as to the timing of cash flows in the insurance or reinsurance contract. ##### [340-30-55-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:55b5d87b55f29cfcc49e469d5f6f22cb76d2bd63f61a675c27ae5508fab5bd3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the insured records a $1,000 asset. Though the total amount ($1,125) is likely to be paid, changes in estimates of the timing of cash flows are expected. At each subsequent reporting date, the amount of the deposit would be increased by the amount of interest earned during the period, calculated using the estimated future cash flows to determine the then-current implicit discount rate (this is consistent with the retrospective approach in applying the interest method). At the end of Year 2, the timing of anticipated recoveries under the insurance or reinsurance contract is revised. A reevaluation of the implicit interest rate produces a rate of 3.63 percent and an asset of $640 at the end of the year. Given the change in the expected timing of cash flows at the end of Year 2, the carrying amount of the asset would be calculated as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-90562D98-62DF-41BD-B1BE-E0257A8FD84A-low.gif) Description Interest Income Cash Recoveries Deposit Balance Initial payment " $1,000 " Year 1 (4 percent) (a) $40 " 1,040 " End of Year 1 $(225) 815 Year 2 (4 percent) 33 848 End of Year 2 (200) 648 Yield adjustment (8) 640 Year 3 (3.63 percent) 23 663 End of Year 3 (175) 488 Year 4 (3.63 percent) 18 506 End of Year 4 (175) 331 Year 5 (3.63 percent) 12 343 End of Year 5 (175) 168 Year 6 (3.63 percent) 7 175 End of Year 6 (175) - Totals $125 " $(1,125)" $- (a) Implicit rate at the inception of the insurance or reinsurance contract. ##### [340-30-55-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:09131e33852ac9a534f5d2fbe99b1cb28ea804cc7e3c51ee480551104dc46b51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example builds on Examples 1 and 2 (see paragraphs [340-30-55-2 through 55-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-2) ). It uses the same assumptions and facts as Example 2 for the first two years; however, at the end of Year 3, the estimated recovery is increased from $1,125 to $1,950 (with the remaining recovery to be $450 per year for the remaining 3 years). For purposes of this Example, assume the magnitude of the change in the estimated recovery is such that a determination should be reached that the contract does include significant underwriting risk. The risk-free rate of interest at Year 1 is 6 percent adjusted for default risk. In addition, this rate would be utilized when appropriate for the life of the contract. The following table illustrates the accounting for a conversion from a contract that transfers neither significant timing risk nor significant underwriting risk or a contract that transfers only significant timing risk to a contract that transfers significant underwriting risk. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-BE45F953-1F7A-4453-A90A-CE2C7478B1A3-low.gif) Description Interest Income Offset to Recorded Losses Cash Recoveries at End of Year Deposit Balance Initial payment " $1,000 " Year 1 (4 percent) $40 $(225) 815 Year 2 (4 percent) 25 (a) (200) 640 Year 3 (3.63 percent) 23 (175) 488 Adjustment $715 (b) " 1,203 " (c) Year 4 (6 percent) 72 (450) 825 Year 5 (6 percent) 50 (450) 425 Year 6 (6 percent) 25 (450) - Totals $88 $862 " $(1,950)" $- (a) The interest income adjustment at 4 percent of $33 less the yield adjustment of $8 equals $25. (b) "At the end of Year 3, there is a change in the estimated recovery to $1950. The payment of the remaining losses will occur over 3 years, in Years 4, 5, and 6." (c) The present value of $450 per year for 3 years discounted at 6 percent (the risk-free rate at the time of the loss adjusted for default risk). ##### [340-30-55-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:59ca0f75ea9c32f5b0a6af923dc02df59401d1554663581962bafe9d05ebe756 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting by the insured for an insurance or reinsurance contract that transfers only significant underwriting risk. The facts are as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-77EC43FE-BAF6-4A02-8678-6CB56571D0DC-low.gif) Initial premium "$1,000 " Coverage period 1 year Expected recoveries "Could aggregate up to $10,000 with none paid prior to Year 8 regardless of when the insured incurs or pays a loss" ##### [340-30-55-9](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:c6975455df05e38505085ad9e9012d2f5ad246b5473b2d5e2893f7e7631efca7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A delayed reimbursement clause, which provides that the full amount will be paid to the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") at the end of Year 8, mitigates timing risk. A $5,000 loss is incurred at the end of Year 1 and is expected to be recovered at the end of Year 8. The risk-free rate of interest in Year 1 for the period from the loss to the expected payment date, adjusted for default risk, is 6 percent. (For the insurer, the risk-free rate would be used but it would not be adjusted for default risk.) At the end of Year 3, the estimated loss is increased from $5,000 to $6,000. ##### [340-30-55-10](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:f05b2aed508f8bf32f65e6e6cea7b11fe097c2ce7fd36637589fea3de1a8f779 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the insured records a $1,000 asset. The $1,000 amount is amortized over the coverage period of 1 year. If the $5,000 loss is incurred, the insured increases the amount of the asset by the present value of the $5,000. (Note that the insured has recorded the entire $5,000 loss from the underlying event in the same period.) At each subsequent reporting date, the portion of the carrying amount of the asset attributable to the incurred loss would be recalculated by discounting the estimated future cash flows. ##### [340-30-55-11](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:5e46e9aaa3031308a2cb3a7452db600dee22964f915d2b67eca7755ce1386992 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The carrying amount of the asset would be calculated as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-B2719F5A-EC7A-4ABD-B83E-312F0E2E9BF2-low.gif) Description Amortization Offset to Recorded Losses Cash Recoveries at End of Year Deposit Balance Initial payment " $1,000 " Amortization " $1,000 " - Year 1 " $3,325 " (a) " 3,325 " (b) Year 2 200 " 3,525 " Year 3 211 " 3,736 " Adjustment 747 " 4,483 " (c) Year 4 270 " 4,753 " Year 5 284 " 5,037 " Year 6 303 " 5,340 " Year 7 320 " 5,660 " Year 8 340 " $6,000 " - Totals " $1,000 " " $6,000 " " $6,000 " $- (a) The loss occurred on the last day of the year. (b) "The present value of $5,000 received after 7 years discounted at 6 percent. At the end of Year 1, there is no remaining deposit applicable to the unexpired portion of the coverage because it is a 1-year contract." (c) "The present value of $6,000 received after 5 years discounted at 6 percent." 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. Source downloaded (UTC): 2026-09-09T23:56:37.773Z to 2026-09-09T23:56:47.153Z Record version: sha256:b30755eeb98ee35757206774ab54a48ed83b6b91bdb449cff5174a0aa42a0eec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-910: Other Assets and Deferred Costs — Contractors—Construction ### Machine-generated study aids ```json { "summary": "ASC 340-910 was the construction-contractor branch of the \"Other Assets and Deferred Costs\" topic, addressing precontract and other deferred costs incurred by construction contractors. Every substantive paragraph (05-1, 15-1, and 50-1) was superseded by ASU 2014-09 (the revenue recognition standard), so the subtopic is now an empty shell with no operative guidance. Costs to obtain and fulfill a contract with a customer are now accounted for under ASC 340-40.", "key_points": [ "All content of this subtopic—overview (340-910-05-1), scope (340-910-15-1), and disclosure (340-910-50-1)—was superseded by Accounting Standards Update No. 2014-09.", "No recognition, measurement, or disclosure requirements remain in ASC 340-910; the subtopic retains only superseded-paragraph placeholders.", "Contractor costs formerly addressed here (e.g., precontract and fulfillment costs) are now evaluated under ASC 340-40, Other Assets and Deferred Costs—Contracts with Customers.", "Revenue on construction-type contracts is now recognized under ASC 606 rather than the legacy contractor-specific guidance in ASC 910.", "Because the guidance is superseded rather than deleted, the paragraph numbers remain in the Codification to preserve the cross-reference trail from legacy literature." ], "categories": [ "Transition and effective dates", "Revenue", "Industry-specific", "Initial measurement" ], "audience_level": "introductory", "student_note": "Do not cite ASC 340-910 as live authority—it is entirely superseded by ASU 2014-09; the common mistake is assuming construction contractors still have industry-specific deferred-cost rules when they must now apply the general ASC 340-40 capitalization tests alongside ASC 606.", "related_topics": [ "340-40", "606", "910", "912-340", "605-35" ], "key_concepts": [ "superseded guidance", "precontract costs", "construction contractors", "costs to obtain a contract", "costs to fulfill a contract", "deferred contract costs" ] } ``` Source downloaded (UTC): 2026-09-09T23:56:37.773Z to 2026-09-09T23:56:37.773Z Record version: sha256:4211eac86dbec5a9a13f6a65f6181ef0e3f57d858af803e79d608f982c44a0b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-910-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/910/#00-status) SEC content: no ##### [340-910-00-1](https://asc.understandingaccounting.org/asc/340/910/#340-910-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:37.773Z to 2026-09-09T23:56:37.773Z Record version: sha256:b425f42db31d75fbabcd4f0c318986105dca40d648e84f2f7696104c33cba493 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
910-340-05-1SupersededAccounting Standards Update No. 2014-0905/28/2014
910-340-15-1SupersededAccounting Standards Update No. 2014-0905/28/2014
910-340-50-1SupersededAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:56:40.584Z to 2026-09-09T23:56:40.584Z Record version: sha256:edb4cc84c11e4bebf2dc57ec546c5216d5af75b96ca1db76ddafbd23db9afa0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-910-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/910/#05-overview-and-background) SEC content: no ##### [340-910-05-1](https://asc.understandingaccounting.org/asc/340/910/#340-910-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:40.584Z to 2026-09-09T23:56:40.584Z Record version: sha256:5e4b7761ee6c0703c3c585d3131e73c523dc244e75a2f73b11882be924e9f1c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:56:43.566Z to 2026-09-09T23:56:43.566Z Record version: sha256:5d5193904ad854db8a124280fdfd32025e230899fdba04f566de9a230bf59380 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-910-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/910/#15-scope-and-scope-exceptions) SEC content: no ##### [340-910-15-1](https://asc.understandingaccounting.org/asc/340/910/#340-910-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:43.566Z to 2026-09-09T23:56:43.566Z Record version: sha256:9d527c3131ad4c52b06ffff5afefb69b8b81df5633d974b73c40ce5af831d7c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:56:47.153Z to 2026-09-09T23:56:47.153Z Record version: sha256:e5b546093dc51aa996781662d5c6ca22eaa0a8ce7c280db9d67f8e305b3fc396 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-910-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/910/#50-disclosure) SEC content: no ##### [340-910-50-1](https://asc.understandingaccounting.org/asc/340/910/#340-910-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:47.153Z to 2026-09-09T23:56:47.153Z Record version: sha256:48f7d8fe562a5f549a36f4c4c5a0241e9dc207f653816f55cef9d96d538c2638 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:56:51.161Z to 2026-09-09T23:57:08.174Z Record version: sha256:5b07595b37186a7086a5fbb0245b73b782869a7ef83f8c3a74e20c3fc0246ead Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915: Other Assets and Deferred Costs — Development Stage Entities ### Machine-generated study aids ```json { "summary": "ASC 340-915 formerly provided guidance on other assets and deferred costs for development stage entities, but every paragraph in the subtopic (Sections 05, 15, 25, and 35) was superseded by Accounting Standards Update No. 2014-10. As a result, there is no longer any incremental GAAP for deferred costs that is specific to development stage entities; such entities apply the same recognition and measurement guidance as any other reporting entity.", "key_points": [ "All content of this subtopic — 340-915-05-1, 340-915-15-1, 340-915-25-1, and 340-915-35-1 through 35-2 — was superseded by ASU 2014-10.", "ASU 2014-10 eliminated the concept of a development stage entity from U.S. GAAP, removing the specialized incremental reporting requirements formerly found in Topic 915.", "Because no substantive guidance remains, an entity formerly meeting the development stage entity definition accounts for other assets and deferred costs under the general guidance in Topic 340 and other applicable Topics.", "Preexisting references to development stage entity deferral practices (for example, deferring organization or start-up type costs) are no longer supported by this subtopic; see Subtopic 720-15 for start-up costs.", "Students should treat this subtopic as a historical placeholder retained in the Codification only to record the supersession and its effective date." ], "categories": [ "Transition and effective dates", "Recognition", "Financial statement presentation" ], "audience_level": "introductory", "student_note": "Exam or research traps here are citation traps: if you find guidance pointing to 340-915, note it is entirely superseded by ASU 2014-10 and apply general GAAP instead. The common misunderstanding is assuming development stage entities may still defer costs (such as organization or start-up costs) that other entities must expense.", "related_topics": [ "915", "720-15", "340-10", "810-10", "275" ], "key_concepts": [ "development stage entity", "superseded guidance", "deferred costs", "other assets", "start-up costs" ] } ``` Source downloaded (UTC): 2026-09-09T23:56:51.161Z to 2026-09-09T23:56:51.161Z Record version: sha256:4ddb6bbfdf7b2549b1371ca8c0f8f56cd3555f6e3b77683313f72206d783332f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/915/#00-status) SEC content: no ##### [340-915-00-1](https://asc.understandingaccounting.org/asc/340/915/#340-915-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:51.161Z to 2026-09-09T23:56:51.161Z Record version: sha256:95ff7ce06114e4b437ef510594034b6f14efbe101f486ce9e543238bfc852e44 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
Development Stage EntitySupersededAccounting Standards Update No. 2014-1006/10/2014
915-340-05-1SupersededAccounting Standards Update No. 2014-1006/10/2014
915-340-15-1SupersededAccounting Standards Update No. 2014-1006/10/2014
915-340-25-1SupersededAccounting Standards Update No. 2014-1006/10/2014
915-340-35-1SupersededAccounting Standards Update No. 2014-1006/10/2014
915-340-35-2SupersededAccounting Standards Update No. 2014-1006/10/2014
Source downloaded (UTC): 2026-09-09T23:56:54.071Z to 2026-09-09T23:56:54.071Z Record version: sha256:565e717a5da7794860c54118e65505c5a6a5b28d77a036657b3f61b3255496ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/915/#05-overview-and-background) SEC content: no ##### [340-915-05-1](https://asc.understandingaccounting.org/asc/340/915/#340-915-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:54.071Z to 2026-09-09T23:56:54.071Z Record version: sha256:2c5f7b6691233d94a3629343f27a3d0e34117ff518e67978f79138a1772a1ceb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). Source downloaded (UTC): 2026-09-09T23:56:57.307Z to 2026-09-09T23:56:57.307Z Record version: sha256:b8666cd2822851f7e8ec168ae2adee97c74d05e6f8420ee733ab5a4d94a6a671 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/915/#15-scope-and-scope-exceptions) SEC content: no ##### [340-915-15-1](https://asc.understandingaccounting.org/asc/340/915/#340-915-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:57.307Z to 2026-09-09T23:56:57.307Z Record version: sha256:82772a1a42c22c5dfcdda3c9693865c41ce82c65f04de802646ca34cee0f55ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). Source downloaded (UTC): 2026-09-09T23:57:01.136Z to 2026-09-09T23:57:01.136Z Record version: sha256:bf80daccfc71ebb0d1c9b1bcb06f8014d57392beb32471eb856fa5712af96202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915-20: 20 Glossary [Read section](https://asc.understandingaccounting.org/asc/340/915/#20-glossary) SEC content: no Source downloaded (UTC): 2026-09-09T23:57:04.548Z to 2026-09-09T23:57:04.548Z Record version: sha256:cc2c2519644f65ce7c2cfb504ce2fa199439d5b0a24b66cbc295ea4f56b8b7b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/915/#25-recognition) SEC content: no ##### [340-915-25-1](https://asc.understandingaccounting.org/asc/340/915/#340-915-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:04.548Z to 2026-09-09T23:57:04.548Z Record version: sha256:cf301a98731e31a037bee5656fdc989da2008201fc2ff80fae8e0c897dd505c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). Source downloaded (UTC): 2026-09-09T23:57:08.174Z to 2026-09-09T23:57:08.174Z Record version: sha256:613a8f90da93be402ea86a64096266ac68f499e182576288363c8b573bb02688 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-915-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/915/#35-subsequent-measurement) SEC content: no ##### [340-915-35-1](https://asc.understandingaccounting.org/asc/340/915/#340-915-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:08.174Z to 2026-09-09T23:57:08.174Z Record version: sha256:e93b4fe115bf741a541c643fb3fbc81cd94ac0c7a76701f514a7cf561792a88d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). ##### [340-915-35-2](https://asc.understandingaccounting.org/asc/340/915/#340-915-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:08.174Z to 2026-09-09T23:57:08.174Z Record version: sha256:ef6c8804a6da106f131b28c0de9db938e2c3ed6ae714d426b581baefeb6ca678 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). Source downloaded (UTC): 2026-09-09T23:57:11.675Z to 2026-09-09T23:57:36.379Z Record version: sha256:9c4b5abc7b4106c9405c00e121efa5bf8092e90b6f857225677c8e7be70966a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928: Other Assets and Deferred Costs — Entertainment—Music ### Machine-generated study aids ```json { "summary": "ASC 340-928 governs when a music entity may capitalize advance royalties paid to artists, the cost of record masters, and minimum guarantees paid in advance by licensees. Capitalization hinges on recoverability: an advance royalty or the record company's share of record master cost is an asset only if the artist's past performance and current popularity provide a sound basis for estimating recovery from future royalties or sales. Capitalized amounts are charged to expense as royalties are earned or amortized over the recorded performance's life in relation to expected net revenue, with immediate write-off of nonrecoverable portions.", "key_points": [ "An advance royalty paid to an artist is reported as an asset only if the artist's past performance and current popularity provide a sound basis for estimating recoverability from future royalties (340-928-25-1).", "The portion of record master cost borne by the record company is an asset if that same past-performance/current-popularity test supports recovery from future sales (340-928-25-2); the portion recoverable from the artist's royalties is accounted for as an advance royalty (340-928-25-3).", "Minimum guarantees paid in advance by a licensee are reported as an asset by the licensee (340-928-25-4).", "Advance royalties are charged to expense as subsequent royalties are earned by the artist, and any portion that appears not to be fully recoverable is expensed in the period the loss becomes evident (340-928-35-1).", "Capitalized record master cost is amortized over the estimated life of the recorded performance using a method that reasonably relates the amount to net revenue expected to be recognized (340-928-35-2).", "Minimum guarantees are charged to expense in accordance with the license agreement terms, with any nonrecoverable portion expensed (340-928-35-3).", "Advance royalties are classified as current and noncurrent assets as appropriate (340-928-45-1), and the capitalized record master cost borne by the record company is disclosed separately (340-928-50-1)." ], "categories": [ "Recognition", "Subsequent measurement", "Impairment", "Industry-specific" ], "audience_level": "intermediate", "student_note": "This is a classic industry-specific capitalization rule: the asset test is a judgmental recoverability standard tied to the artist's track record and current popularity, not a bright line. A common mistake is capitalizing the entire record master cost — only the portion borne by the record company is tested for capitalization; the portion recoverable from the artist's royalties is treated as an advance royalty.", "related_topics": [ "928-720", "928-10", "928-405", "340-10", "926-340" ], "key_concepts": [ "advance royalties", "record master costs", "minimum guarantees", "recoverability assessment", "artist past performance and current popularity", "amortization over estimated life", "licensee capitalization", "current and noncurrent classification" ] } ``` Source downloaded (UTC): 2026-09-09T23:57:11.675Z to 2026-09-09T23:57:11.675Z Record version: sha256:2354352740e024d60e4c3984de9c9c55357657c223a307ce6a840c1ee5a85059 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/928/#00-status) SEC content: no ##### [340-928-00-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:11.675Z to 2026-09-09T23:57:11.675Z Record version: sha256:8445f9bc186eaa5cd2ed9f6c7f124cd75127949fb47478ff88a16a170afe2741 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
928-340-35-2AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:57:14.741Z to 2026-09-09T23:57:14.741Z Record version: sha256:2d65e31babf6abd76a6fb4d0680394bbb1adcea5395c1bcaa7f23d6e617411a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/928/#05-overview-and-background) SEC content: no ##### [340-928-05-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:14.741Z to 2026-09-09T23:57:14.741Z Record version: sha256:950341022bf38ce47e29b7ace2663d7752bf07c8abbeb891d7826883db1a4175 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [licensing agreement](https://asc.understandingaccounting.org/glossary/l/#license-agreements "Contractual arrangements entered into by an owner (licensor) of a record master or music copyright with a licensee granting the licensee the right to sell or distribute records or music for a fixed fee paid to the licensor or for a fee based on sales of records or music. License agreements are modifications of the compulsory provisions of the copyright law.") may require [advance royalties](https://asc.understandingaccounting.org/glossary/a/#advance-royalty "An amount paid to music publishers, record producers, songwriters, or other artists in advance of their earning royalties from record or music sales. Such an amount is based on contractual terms and is generally nonrefundable.") to be paid to artists and [minimum guarantees](https://asc.understandingaccounting.org/glossary/m/#minimum-guarantee "An amount paid in advance by a licensee to a licensor for the right to sell or distribute records or music.") to be advanced to licensors. This Subtopic addresses the accounting for such royalties and guarantees by an entity in the music industry. It also addresses the accounting by such entities for the costs to produce [record masters](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost."). Source downloaded (UTC): 2026-09-09T23:57:18.275Z to 2026-09-09T23:57:18.275Z Record version: sha256:6c8fb02aae140bbbf3ba981a5c1196fc52c3182668f8a7c1081967ca24f1b68d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/928/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-928-15-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:18.275Z to 2026-09-09T23:57:18.275Z Record version: sha256:87ee4d33e96cbf09e501dbd2cd7bfd6d65a66ed23718af2f80e97944fca9d557 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 928-10-15. Source downloaded (UTC): 2026-09-09T23:57:23.467Z to 2026-09-09T23:57:23.467Z Record version: sha256:52993503deb88731eff03b8de5edf789c8adee91cc788fc156a0dd713fd4dd48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/928/#25-recognition) SEC content: no #### Licensor Accounting ##### [340-928-25-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:23.467Z to 2026-09-09T23:57:23.467Z Record version: sha256:157c2825f5c6d5f923c78861d1c221ffe11d30bc96cd0eeef32c1ff6a33a607e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An [advance royalty](https://asc.understandingaccounting.org/glossary/a/#advance-royalty "An amount paid to music publishers, record producers, songwriters, or other artists in advance of their earning royalties from record or music sales. Such an amount is based on contractual terms and is generally nonrefundable.") paid to an artist shall be reported as an asset if the past performance and current popularity of the artist to whom the advance is made provide a sound basis for estimating that the amount of the advance will be recoverable from future [royalties](https://asc.understandingaccounting.org/glossary/r/#royalties "Amounts paid to record producers, songwriters, or other artists for their participation in making records and to music publishers for their copyright interest in music. Amounts for artists are determined by the terms of personal service contracts negotiated between the artists and record entities and usually are determined based upon a percentage of sales activity and license fee income, adjusted for estimated sales returns. Royalties for publishing are based on the copyright or other applicable laws, but the requirements of the law may be modified by licenses issued by the publishers.") to be earned by the artist. ##### [340-928-25-2](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:23.467Z to 2026-09-09T23:57:23.467Z Record version: sha256:cca25ddbad096830569fad04d5a614f81a39fe9ae94fcb2a64b5ce4c0b61d697 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The portion of the [record master](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost.") cost borne by the record company shall be reported as an asset if the past performance and current popularity of the artist provides a sound basis for estimating that the cost will be recovered from future sales. ##### [340-928-25-3](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:23.467Z to 2026-09-09T23:57:23.467Z Record version: sha256:dfc18246e0313502e65612708cded2f8ae18e6941a3bd1e6bb1a42b007c1320b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The portion of the record master cost recoverable from the artist's royalties shall be accounted for as an advance royalty, as discussed in this Subtopic and Subtopic 928-720. #### Licensee Accounting ##### [340-928-25-4](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:23.467Z to 2026-09-09T23:57:23.467Z Record version: sha256:4ff162d0a461eb614a89219cc731220b7c20d06c27a12f0a60af3762591e0178 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If [minimum guarantees](https://asc.understandingaccounting.org/glossary/m/#minimum-guarantee "An amount paid in advance by a licensee to a licensor for the right to sell or distribute records or music.") are paid in advance by a licensee, such guarantees shall be reported as an asset by the licensee. Source downloaded (UTC): 2026-09-09T23:57:26.624Z to 2026-09-09T23:57:26.624Z Record version: sha256:dd14fe69cf65a870ac03f913a4c0e59aeb99b465a6543d772c1b76990e4e5863 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/928/#35-subsequent-measurement) SEC content: no #### Licensor Accounting ##### [340-928-35-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:26.624Z to 2026-09-09T23:57:26.624Z Record version: sha256:d8acd89f2fe95e2c76a962d4647d3815cb7b3db0c53b07669104c10dbc6e62e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [928-720-25-1](https://asc.understandingaccounting.org/asc/720/928/#720-928-25-1), [advance royalties](https://asc.understandingaccounting.org/glossary/a/#advance-royalty "An amount paid to music publishers, record producers, songwriters, or other artists in advance of their earning royalties from record or music sales. Such an amount is based on contractual terms and is generally nonrefundable.") shall be charged to expense as subsequent [royalties](https://asc.understandingaccounting.org/glossary/r/#royalties "Amounts paid to record producers, songwriters, or other artists for their participation in making records and to music publishers for their copyright interest in music. Amounts for artists are determined by the terms of personal service contracts negotiated between the artists and record entities and usually are determined based upon a percentage of sales activity and license fee income, adjusted for estimated sales returns. Royalties for publishing are based on the copyright or other applicable laws, but the requirements of the law may be modified by licenses issued by the publishers.") are earned by the artist. Any portion of such advances that subsequently appear not to be fully recoverable from future royalties to be earned by the artist shall be charged to expense during the period in which the loss becomes evident. ##### [340-928-35-2](https://asc.understandingaccounting.org/asc/340/928/#340-928-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:26.624Z to 2026-09-09T23:57:26.624Z Record version: sha256:ccfef1572dfb581060f080ddf428e6ead39f8d2573192aca8d09a2b73c6967f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The portion of the [record master](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost.") cost recognized as an asset shall be amortized over the estimated life of the recorded performance using a method that reasonably relates the amount to the net revenue expected to be recognized. #### Licensee Accounting ##### [340-928-35-3](https://asc.understandingaccounting.org/asc/340/928/#340-928-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:26.624Z to 2026-09-09T23:57:26.624Z Record version: sha256:25373b2a686864b81fd3cb3b309103ab72e6aee75fc55cc531f7e5d722def390 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Minimum guarantees](https://asc.understandingaccounting.org/glossary/m/#minimum-guarantee "An amount paid in advance by a licensee to a licensor for the right to sell or distribute records or music.") paid in advance, and reported as an asset by the licensee in accordance with paragraph [928-340-25-4](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-4), shall subsequently be charged to expense in accordance with the terms of the [license agreement](https://asc.understandingaccounting.org/glossary/l/#license-agreements "Contractual arrangements entered into by an owner (licensor) of a record master or music copyright with a licensee granting the licensee the right to sell or distribute records or music for a fixed fee paid to the licensor or for a fee based on sales of records or music. License agreements are modifications of the compulsory provisions of the copyright law."). If all or a portion of the minimum guarantee subsequently appears not to be recoverable through future use of the rights obtained under the license, the nonrecoverable portion shall be charged to expense. Source downloaded (UTC): 2026-09-09T23:57:29.691Z to 2026-09-09T23:57:29.691Z Record version: sha256:09db430f4b973c70302caef5a84c725bf288050c6230c5e61decf8695f98165a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/928/#45-other-presentation-matters) SEC content: no #### Licensor Accounting ##### [340-928-45-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:29.691Z to 2026-09-09T23:57:29.691Z Record version: sha256:75a30f676eb8cb18cad96825bc5d6ea31427dc8e626450dc373b81b72f439eae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Advance royalties](https://asc.understandingaccounting.org/glossary/a/#advance-royalty "An amount paid to music publishers, record producers, songwriters, or other artists in advance of their earning royalties from record or music sales. Such an amount is based on contractual terms and is generally nonrefundable.") shall be classified as current and noncurrent assets, as appropriate. Source downloaded (UTC): 2026-09-09T23:57:32.291Z to 2026-09-09T23:57:32.291Z Record version: sha256:8e71349ec09b2e532cea0932deb76aea6ac2fd92de95821f0dd262066f627f45 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-928-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/928/#50-disclosure) SEC content: no #### Licensor Accounting ##### [340-928-50-1](https://asc.understandingaccounting.org/asc/340/928/#340-928-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:32.291Z to 2026-09-09T23:57:32.291Z Record version: sha256:fb62841eba3819971c4d361b35c1c0d8aae3fd5512aaae30d6febe54755a32f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The portion of the [record master](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost.") cost borne by the record company that is recorded as assets shall be disclosed separately. Source downloaded (UTC): 2026-09-09T23:57:38.994Z to 2026-09-09T23:57:57.240Z Record version: sha256:d2740d4ae2dd0be643d2b4de846b8721aeb3f7b7dcc622ed6640d865a473ec71 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940: Other Assets and Deferred Costs — Financial Services—Brokers and Dealers ### Machine-generated study aids ```json { "summary": "ASC 340-940 governs two broker-dealer asset/deferred-cost items: exchange memberships and deferred underwriting expenses. Memberships are classified based on the rights conveyed — as an intangible asset (trading right only), an ownership interest in the exchange (cost less impairment), or a contributed interest (fair value with an equal, offsetting subordinated liability). Underwriting expenses incurred before securities are issued are deferred and recognized when the related underwriting revenues are recorded, or written off if the deal does not close.", "key_points": [ "An exchange membership that conveys only the right to conduct business on an exchange is accounted for as an intangible asset under Subtopic 350-10, with a finite or indefinite life depending on the arrangement terms (340-940-25-1(a)).", "A membership is accounted for as an ownership interest in the exchange if it conveys both ownership and trading rights held for operating purposes, or if ownership must be held to conduct business on the exchange (340-940-25-1(b)).", "A membership whose use is contributed to the broker-dealer under a formal or informal subordination agreement and subordinated to general creditors is recorded as a contributed interest with a corresponding subordinated liability (340-940-25-1(c)).", "A membership registered in an individual's name is an asset of the broker-dealer if an agreement requires the departing member to fund a replacement membership, remit sale proceeds, or transfer the membership for nominal consideration to the entity's designee (340-940-25-2).", "Ownership-interest memberships are initially measured at cost (340-940-30-1) and subsequently at cost less impairment measured under paragraphs 321-10-35-3 through 35-4 (340-940-35-1).", "Contributed-interest memberships are measured initially and subsequently at fair value, with the related subordinated liability measured at an equal and offsetting amount (340-940-30-2; 340-940-35-2).", "Underwriting expenses incurred before issuance of the securities are deferred (340-940-25-3) and recognized when the related revenues are recorded; if the transaction is not completed, participating entities write the costs off to expense (340-940-35-3)." ], "categories": [ "Recognition", "Initial measurement", "Subsequent measurement", "Industry-specific" ], "audience_level": "intermediate", "student_note": "The exam trap is assuming all exchange memberships get the same treatment — classification turns entirely on whether the membership conveys ownership, only trading rights, or is contributed under a subordination agreement, and each bucket has a different measurement basis (350-10 intangible, cost less 321-10 impairment, or fair value with an offsetting liability). Also remember deferred underwriting costs follow the revenue: recognized when underwriting revenue is recorded, expensed immediately if the deal dies.", "related_topics": [ "940-10", "940-340", "350-10", "321-10", "606-10", "940-20" ], "key_concepts": [ "exchange membership", "trading privileges", "ownership interest in an exchange", "contributed interest", "liability subordinated to claims of general creditors", "deferred underwriting expenses", "syndicate cost allocation", "cost less impairment" ] } ``` Source downloaded (UTC): 2026-09-09T23:57:38.994Z to 2026-09-09T23:57:38.994Z Record version: sha256:8439597a48b1a6532b2618e9912b858562f9a19a36b1d2fc4cee39d10a4ad2e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/940/#00-status) SEC content: no ##### [340-940-00-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:38.994Z to 2026-09-09T23:57:38.994Z Record version: sha256:3850f15a88b23e1c6ae11f1a4d067774bc7bc68147550de38472d907dcd12c27 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
ABC AgreementSupersededAccounting Standards Update No. 2016-1912/14/2016
940-340-25-2AmendedAccounting Standards Update No. 2016-1912/14/2016
940-340-35-1AmendedAccounting Standards Update No. 2016-0101/05/2016
Source downloaded (UTC): 2026-09-09T23:57:41.766Z to 2026-09-09T23:57:41.766Z Record version: sha256:3103fca70d83300b314970c65219a7ebaa58b1b3b4e4bd37f7c0a29225c9634d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/940/#05-overview-and-background) SEC content: no ##### [340-940-05-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:41.766Z to 2026-09-09T23:57:41.766Z Record version: sha256:025b33b2fa9f9cbe1fe8d5aa8d74382c11ce8d4abe36154b91d84db1851d8958 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses other assets and deferred costs for brokers and dealers in securities (broker-dealers), including those associated with both of the following: 1. a Exchange memberships. Exchange memberships provide the broker-dealer with the right to do business on the exchanges of which the broker-dealer is a member. Some exchange memberships also represent an ownership interest in the exchange. Due to the demutualization of some exchanges, membership may not be aligned with ownership in the exchange as trading privileges are disaggregated from ownership. Many broker-dealers have memberships in several exchanges and have more than one membership in any particular exchange. Memberships are usually registered in the names of individuals who are affiliated with the broker-dealer. 2. b Underwriting. In connection with its participation in an underwriting of securities, a broker-dealer may receive various types of revenues as well as incur various related expenses. Such revenues include management fees (in the case of the lead or comanaging underwriter), underwriting fees (in the case of the lead underwriter and other members of the syndicate), and selling concession fees (in the case of all selling group members). The related expenses include but are not limited to marketing and advertising fees, legal fees, stabilization costs, and the other costs associated with setting up the syndicate group. These expenses are accumulated by the lead underwriter and are allocated to the other members of the syndicate on a pro-rata basis. Source downloaded (UTC): 2026-09-09T23:57:43.514Z to 2026-09-09T23:57:43.514Z Record version: sha256:b7ed6830e79bc80d810927e215aa270236cd5289959ff111c65b9193477ba6b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/940/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-940-15-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:43.514Z to 2026-09-09T23:57:43.514Z Record version: sha256:729087b157acb1243581ff86b214f434bbb1fd2c904150089261282602d95130 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 940-10-15. Source downloaded (UTC): 2026-09-09T23:57:50.114Z to 2026-09-09T23:57:50.114Z Record version: sha256:348eb09ad11d95b97c42110113b388aabf5d120287643542697faf1a5e67b011 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/940/#25-recognition) SEC content: no #### Exchange Memberships ##### [340-940-25-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:50.114Z to 2026-09-09T23:57:50.114Z Record version: sha256:e789848f14ea14ef8175a6138bb6e0395f4f9fbc119689fa847057acb7d6dd26 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting for exchange memberships depends on the rights they convey and the reasons they are held as assets, as follows: 1. a Intangible asset. If an exchange membership represents only the right to conduct business on an exchange, the entity shall account for the exchange membership as an intangible asset according to the guidance in Subtopic 350-10. Such memberships may have finite or indefinite lives based on the terms of the arrangement and the estimated life of the membership. 2. b Ownership interest in the exchange. An exchange membership shall be accounted for as an ownership interest in the exchange if either of the following conditions is met: 1. 1 The exchange membership represents both an ownership interest and the right to conduct business on the exchange, which are owned by a broker-dealer and held for operating purposes. 2. 2 The exchange membership represents an ownership interest, which must be held by a broker-dealer to conduct business on the exchange. 3. c Contributed interest. A membership may be considered to be an asset of the broker-dealer if its use has been contributed to the broker-dealer under a formal or informal subordination agreement. An exchange membership contributed for the use of the broker-dealer and subordinated to claims of general creditors shall be accounted for as a contributed interest and a liability subordinated to claims of general creditors. ##### [340-940-25-2](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:50.114Z to 2026-09-09T23:57:50.114Z Record version: sha256:1ee8948f146eb22c29b13db97bbd6d501023a0c2dfd99d7aa4b5b47386e7532a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A membership held in the name of an individual is considered to be an asset of the broker-dealer if it is held by the broker-dealer under an agreement that would require the member, upon leaving the broker-dealer, to do any of the following: 1. a Pay the member entity the amount necessary to purchase another membership (if the named individual wishes to retain the membership) 2. b Sell the membership and pay the proceeds over to the member entity 3. c Transfer the membership for a nominal consideration to a person designated by the member entity and satisfactory to the exchange. #### Underwriting Expenses ##### [340-940-25-3](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:50.114Z to 2026-09-09T23:57:50.114Z Record version: sha256:87e1907c145019b9e10485a00b6f4c14fa173b311eca38aa1de95580c1b9379e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Underwriting expenses incurred before the actual issuance of the securities shall be deferred. Source downloaded (UTC): 2026-09-09T23:57:51.737Z to 2026-09-09T23:57:51.737Z Record version: sha256:aceeec116658f2ada37956f9c17b2e4747a755b2ff1869b44e7b363d2dcb4b9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/340/940/#30-initial-measurement) SEC content: no #### Exchange Memberships ##### [340-940-30-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:51.737Z to 2026-09-09T23:57:51.737Z Record version: sha256:b11fb12046910e8e49cb01719e960b9f97aa5c0a208d95a4a9ff7530f5e7fe51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An exchange membership recognized under paragraph [940-340-25-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-1) as an ownership interest in the exchange shall be measured initially at cost. ##### [340-940-30-2](https://asc.understandingaccounting.org/asc/340/940/#340-940-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:51.737Z to 2026-09-09T23:57:51.737Z Record version: sha256:abd7a0a5ca21a82e1d0cce3330b0492daa001e824e5d5dfa104ed60077f4b992 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An exchange membership recognized under paragraph [940-340-25-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-1) as a contributed interest shall be measured initially at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") with the related subordinated liability measured initially at an equal and offsetting amount. Source downloaded (UTC): 2026-09-09T23:57:54.309Z to 2026-09-09T23:57:54.309Z Record version: sha256:efac7afd3ace0969c4d784b357d203eba75f6b5d46ff3cc0731e933e40ebc51d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-940-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/940/#35-subsequent-measurement) SEC content: no #### Exchange Memberships ##### [340-940-35-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:54.309Z to 2026-09-09T23:57:54.309Z Record version: sha256:91bc64a545cb353382203090d9c1d6af628a886dd4ae36fae7b9182fb2e87353 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An exchange membership recognized under paragraph [940-340-25-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-1) as an ownership interest in the exchange shall be measured subsequently at cost less impairment. Impairment shall be measured in accordance with paragraphs [321-10-35-3 through 35-4](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-3) . ##### [340-940-35-2](https://asc.understandingaccounting.org/asc/340/940/#340-940-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:54.309Z to 2026-09-09T23:57:54.309Z Record version: sha256:4bbc7efa2b8e2d3419fd15dd54b94cfe51a933e339990b58fd734154ff8ab1ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An exchange membership recognized under paragraph [940-340-25-1](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-1) as a contributed interest shall be measured subsequently at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") with the related subordinated liability measured subsequently at an equal and offsetting amount. #### Underwriting Expenses ##### [340-940-35-3](https://asc.understandingaccounting.org/asc/340/940/#340-940-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:54.309Z to 2026-09-09T23:57:54.309Z Record version: sha256:a6f81451c92d0c5ebecc12dca3d2709a1ba6ce25c46ec19c02d0b8f5ced3664d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Underwriting expenses deferred under the guidance in paragraph [940-340-25-3](https://asc.understandingaccounting.org/asc/340/940/#340-940-25-3) shall be recognized at the time the related revenues are recorded. In the event that the transaction is not completed and the securities are not issued, the entities that have agreed to participate in the costs associated with the underwriting shall write those costs off to expense. Source downloaded (UTC): 2026-09-09T23:57:59.765Z to 2026-09-09T23:58:11.192Z Record version: sha256:68df1b4b8ae70942fd725ddc2c5187d65d7743c1bf5c38cb6f30f10df23dc98b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-944: Other Assets and Deferred Costs — Financial Services—Insurance ### Machine-generated study aids ```json { "summary": "ASC 340-944 governs how insurance entities account for and report certain deferred costs and prepaid expenses, organized into a General Subsection and a Reinsurance Contracts Subsection. Its operative rule is that amounts an insurer pays a reinsurer for the unexpired portion of reinsured contracts — prepaid reinsurance premiums — must be reported separately as assets (340-944-25-1), rather than netted against related liabilities.", "key_points": [ "The Subtopic addresses accounting and financial reporting for certain deferred costs and prepaid expenses of insurance entities, split into General and Reinsurance Contracts Subsections (340-944-05-1).", "Scope follows the Overall Insurance Subtopic's scope and scope exceptions in Section 944-10-15 (340-944-15-1).", "The Reinsurance Contracts Subsections apply only to reinsurance contracts, with identification of a reinsurance contract governed by the Reinsurance Contracts Subsection of Section 944-20-15 (340-944-15-3).", "Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts (prepaid reinsurance premiums) shall be reported separately as assets (340-944-25-1).", "The separate-asset requirement reflects gross presentation: the ceding entity does not offset prepaid reinsurance premiums against unearned premium or other insurance liabilities." ], "categories": [ "Recognition", "Presentation", "Industry-specific", "Financial statement presentation" ], "audience_level": "intermediate", "student_note": "The one rule to remember is gross reporting: prepaid reinsurance premiums are a separate asset, not a reduction of the insurer's unearned premium liability — a common exam trap is netting reinsurance recoverables and prepaid premiums against direct insurance liabilities.", "related_topics": [ "944-10", "944-20", "944-30", "944-40", "944-605", "340-10" ], "key_concepts": [ "prepaid reinsurance premiums", "reinsurance contract", "ceding entity", "deferred costs", "unexpired portion of reinsured contracts", "gross presentation of reinsurance", "insurance entity" ] } ``` Source downloaded (UTC): 2026-09-09T23:57:59.765Z to 2026-09-09T23:57:59.765Z Record version: sha256:daf20bcc847847527ec0bf5cda68ac74a7a7ff7c9910a8db5061c570fc06b869 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-944-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/944/#05-overview-and-background) SEC content: no ##### [340-944-05-1](https://asc.understandingaccounting.org/asc/340/944/#340-944-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:59.765Z to 2026-09-09T23:57:59.765Z Record version: sha256:6f22fecd232a71d4958275ea6cdb4fba7df83a0c0c3e33c058f26316e6f8e260 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to insurance entities on the accounting for and financial reporting of certain deferred costs and prepaid expenses. The guidance in this Subtopic is provided in the following two Subsections: 1. a General 2. b [Reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts. ### Reinsurance Contracts ##### [340-944-05-2](https://asc.understandingaccounting.org/asc/340/944/#340-944-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:57:59.765Z to 2026-09-09T23:57:59.765Z Record version: sha256:e39339ee66f1d8d06a5df8f9179f8579d6caeea0ea731eb4929337ed851c2bb3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to insurance entities on the accounting for and financial reporting of certain deferred costs and prepaid expenses related to [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts. Source downloaded (UTC): 2026-09-09T23:58:01.561Z to 2026-09-09T23:58:01.561Z Record version: sha256:edf2fb79ae0833ea2f0d7b309d08bd20e8da199bd1e9c9331fd5e586433fdf56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-944-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/944/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-944-15-1](https://asc.understandingaccounting.org/asc/340/944/#340-944-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:01.561Z to 2026-09-09T23:58:01.561Z Record version: sha256:b08a46e966e02ed14624e6fa2bcc77502420382e50cd79dccb8e0759f6afd83e 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 944-10-15. ### Reinsurance Contracts ##### [340-944-15-2](https://asc.understandingaccounting.org/asc/340/944/#340-944-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:01.561Z to 2026-09-09T23:58:01.561Z Record version: sha256:961206b7acf1a02950d4643d690e440cfbea381ecc27f946818b1681adb0cc2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Reinsurance Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the [General Subsection](https://asc.understandingaccounting.org/asc/340/944/#15-scope-and-scope-exceptions) of this Section, with specific instrument qualifications noted below. #### Instruments ##### [340-944-15-3](https://asc.understandingaccounting.org/asc/340/944/#340-944-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:01.561Z to 2026-09-09T23:58:01.561Z Record version: sha256:b34e034ca4530e16f1796d5c29c2620db2622234dfa21776dc414c0837343b9a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Reinsurance Contracts Subsections of this Subtopic applies only to [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts. For guidance on identifying a reinsurance contract, see the [Reinsurance Contracts Subsection](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) of Section 944-20-15. Source downloaded (UTC): 2026-09-09T23:58:07.949Z to 2026-09-09T23:58:07.949Z Record version: sha256:cf155676ed2fcea9b4935d3a9269f40961d65fb3051e84edb5a7f6406afd1e83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-944-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/944/#25-recognition) SEC content: no ### Reinsurance #### Prepaid Insurance Premiums ##### [340-944-25-1](https://asc.understandingaccounting.org/asc/340/944/#340-944-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:07.949Z to 2026-09-09T23:58:07.949Z Record version: sha256:8adf8a70388cd023968f8c7f177d274e5b1a496ce15f72cb9d71d571a82139ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts paid to the [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") relating to the unexpired portion of reinsured contracts ([prepaid reinsurance premiums](https://asc.understandingaccounting.org/glossary/p/#prepaid-reinsurance-premiums "Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts.")) shall be reported separately as assets. Source downloaded (UTC): 2026-09-09T23:58:13.298Z to 2026-09-09T23:58:25.494Z Record version: sha256:6e5ce3e3175f7e956fe5ebd7fde832302874853064097cca576963155f9e6e8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-948: Other Assets and Deferred Costs — Financial Services—Mortgage Banking ### Machine-generated study aids ```json { "summary": "This Subtopic governs the accounting for the cost of issuing certain Government National Mortgage Association (GNMA) securities by mortgage banking entities. Issuers electing the internal reserve method must capitalize the one month's interest cost required to be paid to a trustee (340-948-25-1), subject to a ceiling equal to the present value of net future servicing income (340-948-30-1). The capitalized amount is then amortized in proportion to, and over the period of, estimated net servicing income (340-948-35-1).", "key_points": [ "One month's interest cost that issuers of GNMA securities electing the internal reserve method must pay to a trustee shall be capitalized (340-948-25-1).", "The aggregate amount capitalized, including amounts capitalized under other provisions of the Subtopic, shall not exceed the present value of net future servicing income, discounted at an appropriate long-term interest rate (340-948-30-1).", "Estimated future servicing revenue used in the ceiling test includes expected late charges and other ancillary revenue (340-948-30-1).", "Estimated future servicing costs include direct costs of performing the servicing function plus appropriate allocations of other costs, and may be determined on an incremental cost basis (340-948-30-1).", "The capitalized amount is amortized in proportion to, and over the period of, estimated net servicing income—the excess of servicing revenues over servicing costs (340-948-35-1).", "The scope of this Subtopic follows the Overall Subtopic scope in Section 948-10-15 (340-948-15-1)." ], "categories": [ "Initial measurement", "Subsequent measurement", "Industry-specific", "Recognition" ], "audience_level": "intermediate", "student_note": "This is a narrow, industry-specific deferral rule: the one month's trustee interest is an asset, not an immediate expense, but only up to the present value of net future servicing income. A common misunderstanding is treating the cap as applying only to this cost—it is an aggregate ceiling that includes amounts capitalized under other provisions of Topic 948.", "related_topics": [ "948-10", "860-50", "948-310", "835-30" ], "key_concepts": [ "gnma securities", "internal reserve method", "capitalized issuance cost", "present value of net future servicing income", "servicing revenues and costs", "amortization of deferred costs", "mortgage banking" ] } ``` Source downloaded (UTC): 2026-09-09T23:58:13.298Z to 2026-09-09T23:58:13.298Z Record version: sha256:25929ea90208fc114689042add5a0e48d99c1b75c58ca07083436fce8e9cbd50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-948-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/948/#05-overview-and-background) SEC content: no ##### [340-948-05-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:13.298Z to 2026-09-09T23:58:13.298Z Record version: sha256:d7a342dbd3e202405642090b5261a5f79be9788c2be0a78a0720048104ed2cbf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting for costs of issuing certain [Government National Mortgage Association](https://asc.understandingaccounting.org/glossary/g/#government-national-mortgage-association "Often referred to as Ginnie Mae, GNMA is a U.S. governmental agency that guarantees certain types of mortgage-backed securities and provides funds for and administers certain types of low-income housing assistance programs.") (GNMA) securities. Source downloaded (UTC): 2026-09-09T23:58:17.296Z to 2026-09-09T23:58:17.296Z Record version: sha256:b6597d84a458defa4524dd6e85964bd3a03c4206fa06314a84684b9938d52bdb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-948-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/948/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-948-15-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:17.296Z to 2026-09-09T23:58:17.296Z Record version: sha256:8a8c87e9a68d2637262f4172b477534f963bdec9395d7881d88b1bf2d74332ff 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 948-10-15. Source downloaded (UTC): 2026-09-09T23:58:21.295Z to 2026-09-09T23:58:21.295Z Record version: sha256:740df2905b2b2cec036182e70a299d6bb413c51062386accefe538b4f45125f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-948-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/948/#25-recognition) SEC content: no #### Costs of Issuing Certain GNMA Securities ##### [340-948-25-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:21.295Z to 2026-09-09T23:58:21.295Z Record version: sha256:3901ebfa1a9e99044b0ca001cc7753966c2a9f671a0d9cdc817dc89826ee6683 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. One month's interest cost, which is required to be paid to a trustee by issuers of [Government National Mortgage Association](https://asc.understandingaccounting.org/glossary/g/#government-national-mortgage-association "Often referred to as Ginnie Mae, GNMA is a U.S. governmental agency that guarantees certain types of mortgage-backed securities and provides funds for and administers certain types of low-income housing assistance programs.") (GNMA) securities electing the [internal reserve method](https://asc.understandingaccounting.org/glossary/i/#internal-reserve-method "A method for making payments to investors for collections of principal and interest on mortgage loans by issuers of Government National Mortgage Association (GNMA) securities. An issuer electing the internal reserve method is required to deposit in a custodial account an amount equal to one month's interest on the mortgage loans that collateralize the GNMA security issued."), shall be capitalized. Source downloaded (UTC): 2026-09-09T23:58:23.231Z to 2026-09-09T23:58:23.231Z Record version: sha256:0367230f6e7ae23aee2a4fc003532a8434d920bb2aea4810eb12642323dede68 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-948-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/340/948/#30-initial-measurement) SEC content: no #### Costs of Issuing Certain GNMA Securities ##### [340-948-30-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:23.231Z to 2026-09-09T23:58:23.231Z Record version: sha256:f9980fffb22bc2de67229c3e8d025eda9a8ed45296db24efc6ffa2f8124796e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The aggregate amount capitalized, including amounts capitalized under other provisions of this Subtopic, shall not exceed the present value of net future servicing income. The rate used to determine the present value shall be an appropriate long-term interest rate. For this purpose, estimates of future servicing revenue shall include expected late charges and other ancillary revenue. Estimates of expected future servicing costs shall include direct costs associated with performing the servicing function and appropriate allocations of other costs. Estimated future servicing costs may be determined on an incremental cost basis. Source downloaded (UTC): 2026-09-09T23:58:25.494Z to 2026-09-09T23:58:25.494Z Record version: sha256:39ab534c82b8318aa6c79b675d55d2734740fff8953872e38f731f9ed0c30414 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-948-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/948/#35-subsequent-measurement) SEC content: no #### Costs of Issuing Certain GNMA Securities ##### [340-948-35-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:25.494Z to 2026-09-09T23:58:25.494Z Record version: sha256:f228ba8edbd78b7e6b2f6727106d1d806acca81cd88b1244fc74e901d5d9f953 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount capitalized shall be amortized in proportion to, and over the period of, estimated net servicing income—the excess of servicing revenues over servicing costs. Source downloaded (UTC): 2026-09-09T23:58:29.537Z to 2026-09-09T23:58:41.693Z Record version: sha256:9499b25bb25edbb86b3b51e1732e90d4f55f85a41d6f00d8e92b0bac0b91ffab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-952: Other Assets and Deferred Costs — Franchisors ### Machine-generated study aids ```json { "summary": "ASC 340-952 formerly contained the franchisor-specific guidance on deferred costs (for example, direct and indirect costs of franchise sales). Every paragraph in the subtopic — Sections 05, 15, and 25 — was superseded by ASU 2014-09 (Revenue from Contracts with Customers). Franchisors now account for costs of obtaining and fulfilling franchise contracts under ASC 340-40 and recognize franchise revenue under ASC 606 (including the industry guidance in ASC 952-606).", "key_points": [ "All content of this subtopic, including 340-952-05-1, 340-952-15-1, and 340-952-25-1 through 25-3, was superseded by Accounting Standards Update No. 2014-09.", "No extant recognition, scope, or overview guidance remains in ASC 340-952; it carries no current accounting requirements.", "Costs incurred by a franchisor to obtain and fulfill a franchise contract are now evaluated under ASC 340-40 (incremental costs of obtaining a contract and contract fulfillment costs).", "Franchise fee revenue (initial fees, area development fees, continuing royalties) is recognized under ASC 606, with franchisor-specific application guidance in ASC 952-606.", "Legacy franchisor cost-deferral practice that matched direct costs against unrecognized franchise fee revenue is no longer authoritative GAAP." ], "categories": [ "Revenue", "Industry-specific", "Transition and effective dates", "Recognition" ], "audience_level": "intermediate", "student_note": "This subtopic is a shell — its only exam-relevant fact is that ASU 2014-09 wiped out the old franchisor cost-deferral rules. The common mistake is citing legacy franchise accounting (deferring direct costs until the franchise opens) instead of applying ASC 340-40 and ASC 606/952-606.", "related_topics": [ "340-40", "606", "952-606", "952-720", "606-10" ], "key_concepts": [ "franchisor deferred costs", "superseded guidance", "initial franchise fees", "costs to obtain a contract", "contract fulfillment costs", "revenue from contracts with customers" ] } ``` Source downloaded (UTC): 2026-09-09T23:58:29.537Z to 2026-09-09T23:58:29.537Z Record version: sha256:597e7e9b44bb9945e832a06040158bbce70a2f2f0fb2fc061ccc53fe4807b4b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-952-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/952/#00-status) SEC content: no ##### [340-952-00-1](https://asc.understandingaccounting.org/asc/340/952/#340-952-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:29.537Z to 2026-09-09T23:58:29.537Z Record version: sha256:93cf831b32f30394ddc7e10036915b8ce37217b7ea7399b499ead0c2810a4aa5 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
FranchisorSupersededAccounting Standards Update No. 2014-0905/28/2014
952-340-05-1SupersededAccounting Standards Update No. 2014-0905/28/2014
952-340-15-1SupersededAccounting Standards Update No. 2014-0905/28/2014
952-340-25-1 through 25-3
SupersededAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:58:31.521Z to 2026-09-09T23:58:31.521Z Record version: sha256:73a44964a5e17dec6b55a2905c7db5d3d78527d5efd7183f9c0d2687a4afaedc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-952-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/952/#05-overview-and-background) SEC content: no ##### [340-952-05-1](https://asc.understandingaccounting.org/asc/340/952/#340-952-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:31.521Z to 2026-09-09T23:58:31.521Z Record version: sha256:b8c9b55441d69b4943e95d6367bbeaefe1ef54002f49bf9e1287cd052aa1cb8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:58:35.487Z to 2026-09-09T23:58:35.487Z Record version: sha256:9beafe5f36c06dca68eb9ed925d40843fbeebeadf9995670c268cd591a088278 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-952-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/952/#15-scope-and-scope-exceptions) SEC content: no ##### [340-952-15-1](https://asc.understandingaccounting.org/asc/340/952/#340-952-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:35.487Z to 2026-09-09T23:58:35.487Z Record version: sha256:fdb38c191c1a7604425c2e5fa23e6436efb41156202dddddb39932824b9e82ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:58:38.610Z to 2026-09-09T23:58:38.610Z Record version: sha256:bf80daccfc71ebb0d1c9b1bcb06f8014d57392beb32471eb856fa5712af96202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-952-20: 20 Glossary [Read section](https://asc.understandingaccounting.org/asc/340/952/#20-glossary) SEC content: no Source downloaded (UTC): 2026-09-09T23:58:41.693Z to 2026-09-09T23:58:41.693Z Record version: sha256:b20a81fa350a7d33f432bdabc6f970d528c6f0c6418b330f98ef90c12e435423 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-952-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/952/#25-recognition) SEC content: no ##### [340-952-25-1](https://asc.understandingaccounting.org/asc/340/952/#340-952-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:41.693Z to 2026-09-09T23:58:41.693Z Record version: sha256:67e1371d5b2e8365d8a2b545734ab5f8e91fa5d345611ba53b6ab6c5855320be Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-952-25-2](https://asc.understandingaccounting.org/asc/340/952/#340-952-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:41.693Z to 2026-09-09T23:58:41.693Z Record version: sha256:6085d9dcb1622d184162d35583904e6185869672692fe5a8fa7056af7924b883 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-952-25-3](https://asc.understandingaccounting.org/asc/340/952/#340-952-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:41.693Z to 2026-09-09T23:58:41.693Z Record version: sha256:1b21393ae903af7ecde1f2b0b18248185492d2b335ac576f0e915a44e92c78c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:58:43.326Z to 2026-09-09T23:58:56.807Z Record version: sha256:ba81d9e40b64f1c8102a77456cce77c1c9e232e09bb9c55e8afe33ee096ac363 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954: Other Assets and Deferred Costs — Health Care Entities ### Machine-generated study aids ```json { "summary": "This Subtopic covers \"other assets and deferred costs\" of health care entities — prepaid expenses, deposits, and deferred expenses, including amounts paid to physicians for future services such as administering a hospital department or providing community services that further the entity's mission (340-954-05-2). If such prepaid costs are deferred, they must be amortized over the period benefited (340-954-35-2), and all such items are classified as current or noncurrent as appropriate (340-954-45-1). The former recognition guidance (Sections 25 and part of 35) was superseded by ASU 2014-09, so contract cost questions now fall under ASC 340-40 and revenue under ASC 606.", "key_points": [ "Scope follows the health care entity scope in Section 954-10-15 (340-954-15-1).", "Other assets of health care entities may include prepaid expenses, deposits, and deferred expenses, and prepaid costs may include amounts paid to physicians for future services (340-954-05-2).", "Deferred prepaid costs, including physician prepayments, shall be amortized over the period benefited (340-954-35-2).", "Prepaid expenses, deposits, deferred expenses, and prepaid costs are classified as current or noncurrent as appropriate on a classified balance sheet (340-954-45-1).", "All recognition guidance in Section 25 (340-954-25-1 through 25-3) and 340-954-35-1 were superseded by ASU 2014-09, shifting contract cost accounting to Subtopic 340-40." ], "categories": [ "Subsequent measurement", "Presentation", "Industry-specific", "Recognition" ], "audience_level": "intermediate", "student_note": "This is a short industry overlay: the only substantive rules left are amortize deferred prepaid costs over the period benefited and classify them current/noncurrent. The common mistake is looking here for contract acquisition or fulfillment cost guidance — ASU 2014-09 gutted the recognition paragraphs, so go to ASC 340-40 instead.", "related_topics": [ "340-40", "606", "954-10", "954-605", "954-405" ], "key_concepts": [ "prepaid expenses", "deferred costs", "payments to physicians for future services", "amortization over period benefited", "current versus noncurrent classification", "health care entities", "deposits" ] } ``` Source downloaded (UTC): 2026-09-09T23:58:43.326Z to 2026-09-09T23:58:43.326Z Record version: sha256:2e1c4226e9910f8b9a19f8150d15f528e13338c7c66500f44b68a8535c7627e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/954/#00-status) SEC content: no ##### [340-954-00-1](https://asc.understandingaccounting.org/asc/340/954/#340-954-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:43.326Z to 2026-09-09T23:58:43.326Z Record version: sha256:86979a5e79ef191a2168c705f7e5c8a240a2d7789a194a605718c2065f593bd5 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
954-340-25-1 through 25-3
SupersededAccounting Standards Update No. 2014-0905/28/2014
954-340-35-1SupersededAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:58:46.723Z to 2026-09-09T23:58:46.723Z Record version: sha256:4fed2b1153caa2497964366e85b977a2b686b2c85bc4e95e93f41cb7d129d2a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/954/#05-overview-and-background) SEC content: no ##### [340-954-05-1](https://asc.understandingaccounting.org/asc/340/954/#340-954-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:46.723Z to 2026-09-09T23:58:46.723Z Record version: sha256:44194a8cce43d6382bccb13f0587f12ffb08043d5b3344b45849ba885d57f960 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses other assets and deferred costs for health care entities within the scope of this Topic. ##### [340-954-05-2](https://asc.understandingaccounting.org/asc/340/954/#340-954-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:46.723Z to 2026-09-09T23:58:46.723Z Record version: sha256:2b9e76d0175ca6d30187cb030460ab424e7213428e73a3bea4cfdcd096a466f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Other assets may include prepaid expenses, deposits, and deferred expenses. Prepaid costs may include amounts paid to physicians for future services (for example, administering a hospital department or providing community services that further the entity's mission). Source downloaded (UTC): 2026-09-09T23:58:48.619Z to 2026-09-09T23:58:48.619Z Record version: sha256:b9cdcb0f6dd6eb809d653c17558271fddd849f7c5f5c584e02726ab4f95f99ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/954/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-954-15-1](https://asc.understandingaccounting.org/asc/340/954/#340-954-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:48.619Z to 2026-09-09T23:58:48.619Z Record version: sha256:b6b518eee46d0edcbd5d204500ec63144c6863525081d6a332d8c26025ba9bbd 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 954-10-15. Source downloaded (UTC): 2026-09-09T23:58:51.239Z to 2026-09-09T23:58:51.239Z Record version: sha256:d4241d554231f0a4db8461d38120ab2f163dab679568844b61869f2ce695b3b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/954/#25-recognition) SEC content: no ##### [340-954-25-1](https://asc.understandingaccounting.org/asc/340/954/#340-954-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:51.239Z to 2026-09-09T23:58:51.239Z Record version: sha256:f0aaf33ac9951a973104326a60bd96fefed92e990a94c81f0ed487e8c4f2b66f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-954-25-2](https://asc.understandingaccounting.org/asc/340/954/#340-954-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:51.239Z to 2026-09-09T23:58:51.239Z Record version: sha256:2226b18ac5db51184d5461c0903c1f333e7db0f52e048b7f27d63aec477f909e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-954-25-3](https://asc.understandingaccounting.org/asc/340/954/#340-954-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:51.239Z to 2026-09-09T23:58:51.239Z Record version: sha256:31a5901f6e9664fb3cb9ee594ed8b4d03380d37f54443fad2572e27281722086 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:58:54.219Z to 2026-09-09T23:58:54.219Z Record version: sha256:d2e10c151d8bc625c58d2755fc7613381e5cacc46f2d989a73502f69cbb64c63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/954/#35-subsequent-measurement) SEC content: no ##### [340-954-35-1](https://asc.understandingaccounting.org/asc/340/954/#340-954-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:54.219Z to 2026-09-09T23:58:54.219Z Record version: sha256:4080fb3fdb189fb7fdae7d274b895ba9871890172abdaf9084bf7a3943074d24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). #### Prepaid Costs ##### [340-954-35-2](https://asc.understandingaccounting.org/asc/340/954/#340-954-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:54.219Z to 2026-09-09T23:58:54.219Z Record version: sha256:79bd7026dd136e1b862b72a5819bf7310f04d96ffc68373556ddfbfe1d2b7fc1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prepaid costs, including amounts paid to physicians for future services (for example, administering a hospital department or providing community services that further the entity's mission), if deferred, shall be amortized over the period benefited. Source downloaded (UTC): 2026-09-09T23:58:56.807Z to 2026-09-09T23:58:56.807Z Record version: sha256:8af8c7040fdb9bcc8e6054159d925a94d4668e593352e86860afeba7454a9755 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-954-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/954/#45-other-presentation-matters) SEC content: no ##### [340-954-45-1](https://asc.understandingaccounting.org/asc/340/954/#340-954-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:56.807Z to 2026-09-09T23:58:56.807Z Record version: sha256:18f8a20b69cb8974253bc3b9647e1a51276cb78355af9c4ffb42783f02e191b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prepaid expenses, deposits, deferred expenses, and prepaid costs shall be classified as current or noncurrent as appropriate. Source downloaded (UTC): 2026-09-09T23:58:59.193Z to 2026-09-09T23:59:17.895Z Record version: sha256:592f10f1d0c907b9fe322d79cadec5cb23f8964663b5e18739c157333615a9ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970: Other Assets and Deferred Costs — Real Estate—General ### Machine-generated study aids ```json { "summary": "ASC 340-970 (the Real Estate Project Costs Subsections) governs when costs of real estate projects may be capitalized, how they are subsequently measured and amortized, and when they must be written off. Preacquisition costs are capitalized only if directly identifiable with a specific property, capitalizable if the property were owned, and acquisition is probable; option payments are always capitalized. Once a project is substantially completed and held available for occupancy, carrying and rental operating costs are expensed, depreciation begins, and capitalized rental costs are amortized.", "key_points": [ "Payments to obtain an option to acquire real property are capitalized as incurred; other preacquisition costs are capitalized only if they are directly identifiable with the specific property, would be capitalizable if the property were already acquired, and acquisition of the property or option is probable (340-970-25-3).", "Capitalized preacquisition costs become project costs upon acquisition, or are charged to expense (to the extent not recoverable by selling options, plans, etc.) when it is probable the property will not be acquired (340-970-25-4).", "Internal preacquisition costs are capitalized only for property that will be nonoperating at acquisition, are directly identifiable with it, and were incurred after acquisition became probable; blanket deferral of all internal acquisition costs is not appropriate (340-970-25-5 through 25-6); classification changes do not permit later capitalization of previously expensed internal costs (340-970-35-3 through 35-4).", "Property taxes and insurance are capitalized only while activities necessary to get the property ready for its intended use are in progress, using the same meaning as for interest capitalization under 835-20; afterwards they are expensed (340-970-25-8).", "Amenity costs are allocated as common costs among benefited parcels for which development is probable—costs in excess of anticipated proceeds if the amenity is sold with units, or costs in excess of estimated fair value at substantial physical completion if sold separately or retained (340-970-25-9 through 25-10).", "Incremental revenues from incidental operations in excess of incremental costs reduce capitalized project costs; an excess of incremental costs is charged to expense as incurred (340-970-25-12).", "Rental costs other than initial direct costs (Topic 842) are capitalized if recovery is reasonably expected from future rental operations and amortized over the lease term or expected benefit period beginning when the project is substantially completed and held available for occupancy—no later than one year after cessation of major construction activity (340-970-25-16, 25-18 through 25-19, 35-2); unrecoverable amounts are expensed when lease termination becomes probable (340-970-40-2)." ], "categories": [ "Initial measurement", "Subsequent measurement", "Inventory and PP&E", "Industry-specific" ], "audience_level": "intermediate", "student_note": "This is the classic real estate developer cost-capitalization checklist: watch the \"probable acquisition\" gate for preacquisition costs and the sharp cutoff at substantial completion, after which taxes, insurance, and rental operating costs must be expensed. A common error is assuming all internal costs of hunting for properties can be deferred and rolled into successful acquisitions—340-970-25-5 expressly rejects that.", "related_topics": [ "970-340", "835-20", "340-40", "842", "310-20", "250-10" ], "key_concepts": [ "preacquisition costs", "real estate project costs", "capitalization of option payments", "common costs allocation", "amenities", "incidental operations", "substantially completed and held available for occupancy", "capitalized rental costs" ] } ``` Source downloaded (UTC): 2026-09-09T23:58:59.193Z to 2026-09-09T23:58:59.193Z Record version: sha256:4e58bc0377d42d7c86e884b51fcd2e2ca761b934080d2de115782c9889a25025 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/970/#00-status) SEC content: no ##### [340-970-00-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:58:59.193Z to 2026-09-09T23:58:59.193Z Record version: sha256:96615e92371e881197d51584af97e6916b904c9337e6718e3f5b0710e20dcc66 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. 2016-0202/25/2016
Direct Financing LeaseAmendedAccounting Standards Update No. 2021-0507/19/2021
Direct Financing LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Finance LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Initial Direct CostsAddedAccounting Standards Update No. 2016-0202/25/2016
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Lease TermAddedAccounting Standards Update No. 2016-0202/25/2016
LesseeAddedAccounting Standards Update No. 2016-0202/25/2016
LessorAddedAccounting Standards Update No. 2016-0202/25/2016
Operating LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Phase (1st def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
Phase (2nd def.)AddedAccounting Standards Update No. 2014-0603/14/2014
Sales-Type LeaseAmendedAccounting Standards Update No. 2021-0507/19/2021
Sales-Type LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Underlying AssetAddedAccounting Standards Update No. 2016-0202/25/2016
970-340-25-10AmendedAccounting Standards Update No. 2014-0603/14/2014
970-340-25-13AmendedAccounting Standards Update No. 2014-0905/28/2014
970-340-25-14SupersededAccounting Standards Update No. 2014-0905/28/2014
970-340-25-15SupersededAccounting Standards Update No. 2014-0905/28/2014
970-340-25-16AmendedAccounting Standards Update No. 2016-0202/25/2016
970-340-25-18AddedAccounting Standards Update No. 2014-0905/28/2014
970-340-25-19AddedAccounting Standards Update No. 2014-0905/28/2014
970-340-35-1AmendedAccounting Standards Update No. 2014-0905/28/2014
970-340-35-2AmendedAccounting Standards Update No. 2016-0202/25/2016
970-340-35-2AmendedAccounting Standards Update No. 2014-0905/28/2014
970-340-40-1SupersededAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:59:01.483Z to 2026-09-09T23:59:01.483Z Record version: sha256:e1ed58ce28534646ab6a2a316c0f14e0010284c8f90ce11328dbf3ceaa3d4684 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/970/#05-overview-and-background) SEC content: no ##### [340-970-05-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:01.483Z to 2026-09-09T23:59:01.483Z Record version: sha256:3c175ee1bc0557d089d763295192bad07f4f7c6817a92559808317ac7116276c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content in this Subtopic is contained in the Real Estate [Project Costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project.") Subsections. ### Real Estate Project Costs ##### [340-970-05-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:01.483Z to 2026-09-09T23:59:01.483Z Record version: sha256:be88ed9601a35605cf76f7b4d23bf258bc098f51efe15726093c8eb8277dff1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Real Estate [Project Costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project.") Subsections of this Subtopic provide accounting guidance concerning the capitalization, measurement, and derecognition of certain real estate project costs. ##### [340-970-05-3](https://asc.understandingaccounting.org/asc/340/970/#340-970-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:01.483Z to 2026-09-09T23:59:01.483Z Record version: sha256:74d007fdfa8df8038e53dcaf4e8f47fc1fef4ced598c23dfb9dd01e406dc75ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See also Subtopic 835-20 for additional guidance related to interest costs that can be capitalized into project costs. Source downloaded (UTC): 2026-09-09T23:59:04.624Z to 2026-09-09T23:59:04.624Z Record version: sha256:e5190e7e5c7c34bc3412797ae5015e28b6314842699c5b3fa14f245f6c26f0ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/970/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-970-15-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:04.624Z to 2026-09-09T23:59:04.624Z Record version: sha256:0e4e7bdbf2f801dbacdd8e368c337b31a505e5f69d51b074aa22775198194472 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 970-10-15. ### Real Estate Project Costs ##### [340-970-15-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:04.624Z to 2026-09-09T23:59:04.624Z Record version: sha256:cf7d4735d2ab9e16cad9e6919882478acdc82050c26c73e4f05712e6e9afad14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Real Estate [Project Costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project.") Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the [Real Estate Project Costs Subsection](https://asc.understandingaccounting.org/asc/970/10/#15-scope-and-scope-exceptions) of Section 970-10-15. Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:afc7245d7cf447f02f9d8e6ea1b807f43794fba2afdf4947a5d3fde2329eeb0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/970/#25-recognition) SEC content: no ### Real Estate Project Costs #### Acquisition, Development, and Construction Costs ##### [340-970-25-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:a73c81e565f28c82ba8edb01d39f149e1e33cd1539fdef7af6c0712a8519eac1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection does not address the accounting for costs incurred for acquisitions of property that will be used in the entity's own operations, other than for sale or rental. ##### [340-970-25-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:503a86b91fe96e833d56274a4de8d845dc6280ecc32e54fd63c79a3b63ebe340 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [310-20-55-9 through 55-10](https://asc.understandingaccounting.org/asc/310/20/#310-20-55-9) provides guidance on how to distinguish between internal and external costs. The capitalization provisions of this Section for [preacquisition costs](https://asc.understandingaccounting.org/glossary/p/#preacquisition-costs "Costs related to a property that are incurred for the express purpose of, but prior to, obtaining that property. Examples of preacquisition costs may be costs of surveying, zoning or traffic studies, or payments to obtain an option on the property.") apply to internally generated costs. ##### [340-970-25-3](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:924280db85faaea5664ab512626d2ecce62a9f58bc75665cdccebcad85ca668d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Payments to obtain an option to acquire real property shall be capitalized as incurred. All other costs related to a property that are incurred before the entity acquires the property, or before the entity obtains an option to acquire it, shall be capitalized if all of the following conditions are met and otherwise shall be charged to expense as incurred: 1. a The costs are directly identifiable with the specific property. 2. b The costs would be capitalized if the property were already acquired. 3. c Acquisition of the property or of an option to acquire the property is probable (that is, likely to occur). This condition requires that the prospective purchaser is actively seeking to acquire the property and has the ability to finance or obtain financing for the acquisition and that there is no indication that the property is not available for sale. ##### [340-970-25-4](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:bb285e0715be7c32782fd1d538bdd276d63028c31348cfdecd5f8d0701bfd65a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Capitalized preacquisition costs either: 1. a Shall be included as [project costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project.") upon the acquisition of the property 2. b To the extent not recoverable by the sale of the options, plans, and so forth, shall be charged to expense when it is probable that the property will not be acquired. ##### [340-970-25-5](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:de02005c07d5f4f02a89f35ed189da58646d81b25c283c9a2f7a4741d49db5de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The view that all internal costs of identifying and acquiring commercial properties should be deferred and, in some manner, capitalized as part of the cost of successful property acquisitions is not appropriate. ##### [340-970-25-6](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:1f8adaf08ad11b1b73296a52610439f97a8a226ec0b03faef1bb66251f629ffe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Internal costs of preacquisition activities incurred in connection with the acquisition of a property that will be classified as nonoperating at the date of acquisition that are directly identifiable with the acquired property and that were incurred subsequent to the time that acquisition of that specific property was considered probable (that is, likely to occur) shall be capitalized as part of the cost of that acquisition. ##### [340-970-25-7](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:62127692fd4404472898d5f85b4fd012251b0f722a82aa8f68ab5d3d994d1c27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [970-340-25-17](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-17) is also applicable in situations in which the acquired property is partially operating and partially nonoperating. ##### [340-970-25-8](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:9f2338c42fe97e70c547397cf64bd377587566480975c6e533295c9ef019b7b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs incurred on real estate for property taxes and insurance shall be capitalized as property cost only during periods in which activities necessary to get the property ready for its intended use are in progress. The phrase _activities necessary to get the property ready for its intended use are in progress_ is used here with the same meaning as it has for interest capitalization in paragraphs [835-20-25-3 through 25-4](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-3) and [835-20-25-8](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-8). Costs incurred for such items after the property is substantially complete and ready for its intended use shall be charged to expense as incurred. The phrase _substantially complete and ready for its intended use_ is used here with the same meaning as it has for interest capitalization in paragraph [835-20-25-5](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-5). ##### [340-970-25-9](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:8507d75e1402e2c945310b831c78c568dffd54ef9342556ec3f170c6922f2831 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting for costs of [amenities](https://asc.understandingaccounting.org/glossary/a/#amenities "Features that enhance the attractiveness or perceived value of a time-sharing interval. Examples of amenities include golf courses, utility plants, clubhouses, swimming pools, tennis courts, indoor recreational facilities, and parking facilities. See also Promised Amenities.") shall be based on management's plans for the amenities in accordance with the following: 1. a If an amenity is to be sold or transferred in connection with the sale of individual units, costs in excess of anticipated proceeds shall be allocated as [common costs](https://asc.understandingaccounting.org/glossary/c/#common-costs "Costs that relate to two or more units or phases within a real estate or time-sharing project.") because the amenity is clearly associated with the development and sale of the project. The common costs include expected future operating costs to be borne by the developer until they are assumed by buyers of units in a project. 2. b If an amenity is to be sold separately or retained by the developer, capitalizable costs of the amenity in excess of its estimated fair value as of the expected date of its substantial physical completion shall be allocated as common costs. For the purpose of determining the amount to be capitalized as common costs, the amount of cost previously allocated to the amenity shall not be revised after the amenity is substantially completed and available for use. A later sale of the amenity at more or less than its estimated fair value as of the date of substantial physical completion, less any accumulated depreciation, results in a gain or loss that shall be included in net income in the period in which the sale occurs. ##### [340-970-25-10](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:4f4ceb2a3b07cd0061e1c74a4881d85d3c7337460f7109d080ac51c5be395263 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of amenities shall be allocated among land parcels benefited and for which development is probable. A land parcel may be considered to be an individual lot or unit, an amenity, or a [phase](https://asc.understandingaccounting.org/glossary/p/#phase "A contractually or physically distinguishable portion of a real estate project (including time-sharing projects). That portion is distinguishable from other portions based on shared characteristics such as: Units a developer has declared or legally registered to be for sale Units linked to an owners association Units to be constructed during a particular time period How a developer plans to build the real estate project."). The fair value of a parcel is affected by its physical characteristics, its highest and best use, and the time and cost required for the buyer to make such use of the property considering access, development plans, zoning restrictions, and market absorption factors. ##### [340-970-25-11](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:aa56b9f1d5ff09efd43a5fd703e5bc8af86e94832b229d3549a997cd818d0beb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Before an amenity is substantially completed and available for use, operating income (or loss) of the amenity shall be included as a reduction of (or an addition to) common costs. When an amenity to be sold separately or retained by the developer is substantially completed and available for use, current operating income and expenses of the amenity shall be included in current operating results. ##### [340-970-25-12](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:c2c79f1914cc40bb9c2170edc4c237672865c830ca8cf9df160bb8db01fd0cff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Incremental revenues from incidental operations](https://asc.understandingaccounting.org/glossary/i/#incremental-revenues-from-incidental-operations "Revenues that would not be produced except in relation to the conduct of incidental operations.") in excess of [incremental costs of incidental operations](https://asc.understandingaccounting.org/glossary/i/#incremental-costs-of-incidental-operations "Costs that would not be incurred except in relation to the conduct of incidental operations. Interest, taxes, insurance, security, and similar costs that would be incurred during the development of a real estate project regardless of whether incidental operations were conducted are not incremental costs.") shall be accounted for as a reduction of capitalized project costs. Incremental costs in excess of incremental revenue shall be charged to expense as incurred, because the incidental operations did not achieve the objective of reducing the costs of developing the property for its intended use. #### Costs Incurred to Sell and Rent Real Estate Projects, Including Initial Rental Operations ##### [340-970-25-13](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:46f0f97c1a18250568d58a5a072ef6b13da6df8ad5c3a0c165ba2dde484cc9a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Costs incurred to sell real estate projects](https://asc.understandingaccounting.org/glossary/c/#costs-incurred-to-sell-real-estate-projects "Costs related to the sale of real estate, including the following: Model units and their furnishings Sales facilities Sales brochures Legal fees for preparation of prospectuses Semipermanent signs Advertising Grand openings Sales overhead including sales salaries.") shall be evaluated for capitalization in accordance with paragraphs [340-40-25-1 through 25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) . 1. a [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-970-25-14](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:0202132cc321e55ff49000941fd323ad754581e2781a78669ae4590d81be5891 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-970-25-15](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:9f09fa11184bf12a31f076374abeaf8c06258f850d5ee766b74e36b59c0f900d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-970-25-16](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:61e806c06ce7b83b34c2c0b72d247ebdf5aa7cb2b4402372c0c496a66d45fe61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If [costs incurred to rent real estate projects](https://asc.understandingaccounting.org/glossary/c/#costs-incurred-to-rent-real-estate-projects "Costs related to real estate rental activities, including the following: Model units and their furnishings Rental facilities Semipermanent signs Rental brochures Advertising Grand openings Rental overhead including rental salaries."), other than [initial direct costs](https://asc.understandingaccounting.org/glossary/i/#initial-direct-costs "Incremental costs of a lease that would not have been incurred if the lease had not been obtained."), under [operating leases](https://asc.understandingaccounting.org/glossary/o/#operating-lease "From the perspective of a lessee, any lease other than a finance lease. From the perspective of a lessor, any lease other than a sales-type lease or a direct financing lease.") or [direct financing leases](https://asc.understandingaccounting.org/glossary/d/#direct-financing-lease "From the perspective of a lessor, a lease that meets none of the criteria in paragraph 842-10-25-2 but meets the criteria in paragraph 842-10-25-3(b)and is not an operating lease in accordance with paragraph 842-10-25-3A.") are related to and their recovery is reasonably expected from future rental operations, they shall be capitalized. Examples are costs of model units and their furnishings, rental facilities, semipermanent signs, grand openings, and unused rental brochures. Costs that do not meet the criteria for capitalization shall be expensed as incurred, for example, rental overhead. Initial direct costs are defined in Topic 842 and the accounting for initial direct costs is prescribed in that Topic. ##### [340-970-25-17](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:078c2de636d1237f8c594c11c66646b59a4d7b4dcbb2d4083100d419c1ea498f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If portions of a rental project are substantially completed and occupied by tenants or held available for occupancy and other portions have not yet reached that stage, the substantially completed portions shall be accounted for as a separate project. Costs incurred shall be allocated between the portions under construction and the portions substantially completed and held available for occupancy. #### Initial Rental Operations ##### [340-970-25-18](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:2f350ac6c82a955b7e007cbb153768d03b1af4bc9e748d21deb982e99ac9fe95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a real estate project is substantially completed and held available for occupancy: 1. a Rental operating costs shall be charged to expense when incurred. 2. b All carrying costs (such as real estate taxes) shall be charged to expense when incurred, depreciation on the cost of the project shall be provided. 3. c Costs to rent the project shall be amortized in accordance with paragraph [970-340-35-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-35-2). ##### [340-970-25-19](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:2ca0f2a528bec0d9bdf9f78f03f6fc32c1d414071572bcac9ef49a6fef8a461e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A real estate project shall be considered substantially completed and held available for occupancy upon completion of tenant improvements by the developer but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup). Source downloaded (UTC): 2026-09-09T23:59:11.849Z to 2026-09-09T23:59:11.849Z Record version: sha256:745361c42572c089d031e3e4af709b23015ca957bd791b721a86b40c026ef53e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/970/#35-subsequent-measurement) SEC content: no ### Real Estate Project Costs #### Determining Amounts to Be Capitalized or Expensed ##### [340-970-35-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:11.849Z to 2026-09-09T23:59:11.849Z Record version: sha256:c30ac62b5b9613502366648cf82931e2d9f014702351f5b7e5b6bd797bfa1a5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimates and cost allocations shall be reviewed at the end of each financial reporting period until a project is substantially completed and available for sale. Costs shall be revised and reallocated as necessary for material changes on the basis of current estimates. Changes in estimates shall be reported in accordance with paragraphs [250-10-45-17 through 45-20](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-17) and [250-10-50-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-4). ##### [340-970-35-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:11.849Z to 2026-09-09T23:59:11.849Z Record version: sha256:c4b68f3e985052ad08f634f2d2917ae1d6e68174d8e1d3d0bba1cded783d21cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Capitalized rental costs directly related to revenue from a specific [operating lease](https://asc.understandingaccounting.org/glossary/o/#operating-lease "From the perspective of a lessee, any lease other than a finance lease. From the perspective of a lessor, any lease other than a sales-type lease or a direct financing lease.") or [direct financing lease](https://asc.understandingaccounting.org/glossary/d/#direct-financing-lease "From the perspective of a lessor, a lease that meets none of the criteria in paragraph 842-10-25-2 but meets the criteria in paragraph 842-10-25-3(b)and is not an operating lease in accordance with paragraph 842-10-25-3A."), other than [initial direct costs](https://asc.understandingaccounting.org/glossary/i/#initial-direct-costs "Incremental costs of a lease that would not have been incurred if the lease had not been obtained."), shall be amortized over the [lease term](https://asc.understandingaccounting.org/glossary/l/#lease-term "The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor."). Capitalized rental costs, other than initial direct costs, not directly related to revenue from a specific [lease](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") shall be amortized over the period of expected benefit. The amortization period shall begin when the project is substantially completed and held available for occupancy. See paragraphs [970-340-25-18 through 25-19](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-18) for the definition of substantially completed and held available for occupancy. Initial direct costs are defined in Topic 842 on leases, and the accounting for initial direct costs is prescribed in that Topic. Topic 842 does not address whether a lessee that accounts for the sale or rental of real estate projects under Topic 970 should capitalize rental costs associated with ground and building leases. ##### [340-970-35-3](https://asc.understandingaccounting.org/asc/340/970/#340-970-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:11.849Z to 2026-09-09T23:59:11.849Z Record version: sha256:8f1550cd058f9b8f484eafc4c379ead1d1fffd5583bae865118f80737c545dbe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity subsequently determines that a property will be classified as operating at the date of acquisition, the internal costs of preacquisition activities shall be charged to expense and any additional costs shall be expensed as incurred. ##### [340-970-35-4](https://asc.understandingaccounting.org/asc/340/970/#340-970-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:11.849Z to 2026-09-09T23:59:11.849Z Record version: sha256:31bd25d3fc9d26654e2be42d6507f806e1f5a53e1a5be839fed52874c61e3da2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity subsequently determines that a property will be classified as nonoperating at the date of acquisition, previously expensed internal costs of preacquisition activities shall not be capitalized as part of the cost of that acquisition. Source downloaded (UTC): 2026-09-09T23:59:15.601Z to 2026-09-09T23:59:15.601Z Record version: sha256:dee889f77da707efafc4222488e34eb4807a5cc698b4e80637c78632ea53a9da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/340/970/#40-derecognition) SEC content: no ### Real Estate Project Costs ##### [340-970-40-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-40-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:15.601Z to 2026-09-09T23:59:15.601Z Record version: sha256:cdbd8deacf7539f1d69b46fa591da51a93185d4eb1a61d1c33bd0d5f7898cb29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). #### Rental Costs ##### [340-970-40-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-40-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:15.601Z to 2026-09-09T23:59:15.601Z Record version: sha256:dc5896308dcd0c99322e047e1a8cdac77ae881b7ea488fe616cd71630b8d9ccd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimated unrecoverable amounts of unamortized capitalized rental costs associated with a lease or group of leases shall be charged to expense when it becomes probable that the lease(s) will be terminated. Source downloaded (UTC): 2026-09-09T23:59:19.735Z to 2026-09-09T23:59:36.956Z Record version: sha256:4bfed62072ab7497f7f1cb7fdda07a040a7f18120fdf0dec112261c0667f7bf2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978: Other Assets and Deferred Costs — Real Estate—Time-Sharing Activities ### Machine-generated study aids ```json { "summary": "This Subtopic governs deferred cost recognition for real estate time-sharing activities. The default rule is that all costs incurred to sell time-sharing intervals are expensed as incurred unless they qualify for capitalization as incremental costs of obtaining a contract under 340-40-25-1 through 25-4. Seller financing costs (e.g., loan origination costs) follow Subtopic 310-20, and incremental costs to rent units during holding periods are deferred and then expensed (or netted against inventory) when the rental occurs.", "key_points": [ "All costs incurred to sell time-sharing intervals shall be charged to expense as incurred unless they qualify for capitalization under paragraphs 340-40-25-1 through 25-4 (340-978-25-1).", "Costs incurred by a seller related to financing, such as loan origination costs, are accounted for under Subtopic 310-20 (340-978-25-4).", "Costs to rent units during holding periods are deferred only if they are both directly associated with rental transactions with recovery reasonably expected, and incremental to that transaction (340-978-25-5).", "A commission is the cited example of a directly associated, incremental holding-period rental cost (340-978-25-5).", "Deferred holding-period rental costs are charged to expense, or netted in the reduction of inventory costs per 978-330-35-3, in the period the rental takes place (340-978-25-5).", "Much of the legacy time-sharing selling-cost deferral guidance (25-1(a)-(b), 25-2, 25-3, 40-1, 40-2) was superseded by ASU 2014-09, pushing analysis to Subtopic 340-40 (340-978-60-1)." ], "categories": [ "Recognition", "Industry-specific", "Revenue", "Inventory and PP&E" ], "audience_level": "intermediate", "student_note": "The exam trap is assuming time-sharing sellers still get the old industry-specific deferral of selling costs — ASU 2014-09 superseded that, so capitalization now depends solely on the 340-40 incremental-cost test, with expensing as the default. Remember the two distinct carve-outs: financing costs go to 310-20, and holding-period rental costs (like commissions) are deferred until the rental occurs.", "related_topics": [ "340-40", "978-10", "978-330", "310-20", "606" ], "key_concepts": [ "time-sharing intervals", "costs to sell", "incremental cost of obtaining a contract", "holding period rental costs", "deferred costs", "loan origination costs", "inventory cost reduction" ] } ``` Source downloaded (UTC): 2026-09-09T23:59:19.735Z to 2026-09-09T23:59:19.735Z Record version: sha256:58cbe80a8a1b9c1f1691105c30387824a349e951c3ebd1236ae392414faa9787 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/978/#00-status) SEC content: no ##### [340-978-00-1](https://asc.understandingaccounting.org/asc/340/978/#340-978-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:19.735Z to 2026-09-09T23:59:19.735Z Record version: sha256:921a78acf7505050b376f73a8141df5b6e4ba9f1deadc127021336202667146b 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
Deposit MethodSupersededAccounting Standards Update No. 2014-0905/28/2014
Incidental OperationsSupersededAccounting Standards Update No. 2014-0905/28/2014
PhaseSupersededAccounting Standards Update No. 2014-0905/28/2014
Phase (2nd def.)AmendedAccounting Standards Update No. 2014-0603/14/2014
ProjectSupersededAccounting Standards Update No. 2014-0905/28/2014
Time-SharingAmendedAccounting Standards Update No. 2014-0603/14/2014
Undivided Interest (2nd def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
978-340-25-1AmendedAccounting Standards Update No. 2014-0905/28/2014
978-340-25-2SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-25-3SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-40-1SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-40-2SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-60-1AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-09T23:59:22.917Z to 2026-09-09T23:59:22.917Z Record version: sha256:c1308e8125aafde15fa72ed34b41990c95d44f8418596e00169d21eba5d0ee57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/978/#05-overview-and-background) SEC content: no ##### [340-978-05-1](https://asc.understandingaccounting.org/asc/340/978/#340-978-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:22.917Z to 2026-09-09T23:59:22.917Z Record version: sha256:a15d5480ca4daf29c1c4edad18254994ad81f78f4b0064ef56997865ba10b27c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses real estate [time-sharing](https://asc.understandingaccounting.org/glossary/t/#time-sharing "An arrangement in which a seller sells or conveys the right to occupy a dwelling unit for specified periods in the future. Forms of time-sharing arrangements include but are not limited to fixed and floating time, interval ownership, undivided interests, points programs, vacation clubs, right-to-use arrangements such as tenancy-for-years arrangements, and arrangements involving special-purpose entities. In this context, an undivided interest is a time-sharing arrangement that involves a tenant-in-common interest in a condominium unit or entire improved property, and in which the interest holder is assigned a specific period (generally, a specific week). The interest holder is also assigned a specific unit if the undivided interest is in the entire improved property.") deferred cost recognition issues. Source downloaded (UTC): 2026-09-09T23:59:26.348Z to 2026-09-09T23:59:26.348Z Record version: sha256:29fb46e9801ba1a802ea2db1bf737f1ae0e926657025cfb573e913f943c44f40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/978/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-978-15-1](https://asc.understandingaccounting.org/asc/340/978/#340-978-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:26.348Z to 2026-09-09T23:59:26.348Z Record version: sha256:184f0804c0e190d0d161f34417a4a98fc28ffc97dd35b6c6f982e7596e383b9a 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 978-10-15. Source downloaded (UTC): 2026-09-09T23:59:30.870Z to 2026-09-09T23:59:30.870Z Record version: sha256:4fbc94d50e55eb5dff15860d3f9672d35ac9359495d939e56a46a2504696321b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/978/#25-recognition) SEC content: no #### Costs to Sell Time-Sharing Intervals ##### [340-978-25-1](https://asc.understandingaccounting.org/asc/340/978/#340-978-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:30.870Z to 2026-09-09T23:59:30.870Z Record version: sha256:644106eeda32241e073185e86c7e219f0bf82eace2246a68eccf32afef56f6e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All costs incurred to sell [time-sharing](https://asc.understandingaccounting.org/glossary/t/#time-sharing "An arrangement in which a seller sells or conveys the right to occupy a dwelling unit for specified periods in the future. Forms of time-sharing arrangements include but are not limited to fixed and floating time, interval ownership, undivided interests, points programs, vacation clubs, right-to-use arrangements such as tenancy-for-years arrangements, and arrangements involving special-purpose entities. In this context, an undivided interest is a time-sharing arrangement that involves a tenant-in-common interest in a condominium unit or entire improved property, and in which the interest holder is assigned a specific period (generally, a specific week). The interest holder is also assigned a specific unit if the undivided interest is in the entire improved property.")[intervals](https://asc.understandingaccounting.org/glossary/i/#interval "The specific period (generally, a specific week) during the year that a time-sharing unit is specified by agreement to be available for occupancy by a particular customer. Also denoted Time-Sharing Interest or Time-Share.") should be charged to expense as incurred unless they specifically qualify for capitalization in accordance with the guidance in paragraphs [340-40-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) . 1. a [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-978-25-2](https://asc.understandingaccounting.org/asc/340/978/#340-978-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:30.870Z to 2026-09-09T23:59:30.870Z Record version: sha256:ec36a391098874c1f99bbfa23f61511bc052583aeb4ea8ed9cba0dd4b9c701dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-978-25-3](https://asc.understandingaccounting.org/asc/340/978/#340-978-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:30.870Z to 2026-09-09T23:59:30.870Z Record version: sha256:70c26619b65107644d2550d3b4ad25adf009170d08232bba991ddf7d85dc01b5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). #### Costs Related to Financing ##### [340-978-25-4](https://asc.understandingaccounting.org/asc/340/978/#340-978-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:30.870Z to 2026-09-09T23:59:30.870Z Record version: sha256:214979ed46b925af55b6d3f14742d2e74123f2e26a756313ffc59b538b4045dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs incurred by a seller that are related to financing, such as loan origination costs, shall be accounted for in accordance with Subtopic 310-20. #### Costs to Rent Units During Holding Periods ##### [340-978-25-5](https://asc.understandingaccounting.org/asc/340/978/#340-978-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:30.870Z to 2026-09-09T23:59:30.870Z Record version: sha256:0e6bea17f5837f503331b8b641843de3c12786547156e1d2a57de576b5c13310 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs incurred to rent units during holding periods shall be deferred if they are both: 1. a Directly associated with, and their recovery is reasonably expected from, transactions involving the rental of units during holding periods 2. b Incremental, that is, the costs would not have been incurred by the seller had a particular [holding period](https://asc.understandingaccounting.org/glossary/h/#holding-period "The period during which a time-sharing interval is held for sale. Sellers may offer time-sharing units for rent during such holding periods.") rental transaction not occurred. An example of a directly associated, incremental cost is a commission. Deferred costs to rent time-sharing units during holding periods shall be charged to expense, or netted in the reduction of inventory costs (as described in paragraph [978-330-35-3](https://asc.understandingaccounting.org/asc/330/978/#330-978-35-3)), in the period in which the rental takes place. Source downloaded (UTC): 2026-09-09T23:59:33.693Z to 2026-09-09T23:59:33.693Z Record version: sha256:c5315d1853b52d3fbad630431dfeab7249a7f84f1c605684183311611354d2e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/340/978/#40-derecognition) SEC content: no ##### [340-978-40-1](https://asc.understandingaccounting.org/asc/340/978/#340-978-40-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:33.693Z to 2026-09-09T23:59:33.693Z Record version: sha256:e49a98e67c135699f8e9fdcf562358d8ee9530bd936e4c9e83040a6cc719eeca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-978-40-2](https://asc.understandingaccounting.org/asc/340/978/#340-978-40-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:33.693Z to 2026-09-09T23:59:33.693Z Record version: sha256:8a7e085305b02718f8796d8bc3b8b7c3e07d152a81c63f535b1f0b29b642fcfc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-09T23:59:36.956Z to 2026-09-09T23:59:36.956Z Record version: sha256:7469102ded7cd4413ee98a76655b6acf3df1db4e9a20657a09274c44b58063b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-978-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/340/978/#60-relationships) SEC content: no ##### [340-978-60-1](https://asc.understandingaccounting.org/asc/340/978/#340-978-60-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:36.956Z to 2026-09-09T23:59:36.956Z Record version: sha256:f8dc8bc9619c86a2b94d7878b2952ade18255b64a38691e065a2a75e8ec59fa8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For expense determination of all costs incurred to sell [time-sharing](https://asc.understandingaccounting.org/glossary/t/#time-sharing "An arrangement in which a seller sells or conveys the right to occupy a dwelling unit for specified periods in the future. Forms of time-sharing arrangements include but are not limited to fixed and floating time, interval ownership, undivided interests, points programs, vacation clubs, right-to-use arrangements such as tenancy-for-years arrangements, and arrangements involving special-purpose entities. In this context, an undivided interest is a time-sharing arrangement that involves a tenant-in-common interest in a condominium unit or entire improved property, and in which the interest holder is assigned a specific period (generally, a specific week). The interest holder is also assigned a specific unit if the undivided interest is in the entire improved property.") [intervals](https://asc.understandingaccounting.org/glossary/i/#interval "The specific period (generally, a specific week) during the year that a time-sharing unit is specified by agreement to be available for occupancy by a particular customer. Also denoted Time-Sharing Interest or Time-Share.") see Subtopic 340-40 on the incremental cost of obtaining a contract with a customer. Source downloaded (UTC): 2026-09-09T23:59:39.238Z to 2026-09-10T00:00:06.441Z Record version: sha256:8f6ef81835a30563fbc1007859fb3d0a91b64bde56bf1c91fffec9b3427c7d72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980: Other Assets and Deferred Costs — Regulated Operations ### Machine-generated study aids ```json { "summary": "This subtopic governs when a rate-regulated entity may capitalize incurred costs as regulatory assets (deferred costs) and, in particular, how to account for phase-in plans — rate-making arrangements that defer part of the rate increase caused by placing a newly completed plant in service in order to avoid a \"rate spike.\" A cost is capitalized only if it is probable that future revenue at least equal to the cost will result from including it in allowable costs and that revenue is intended to recover the previously incurred cost rather than fund similar future costs (980-340-25-1). Amounts deferred under a phase-in plan may be capitalized only for plants completed or substantially constructed before January 1, 1988, and only if the plan meets four strict criteria (980-340-25-3).", "key_points": [ "An incurred cost that would otherwise be expensed is capitalized as a regulatory asset only if (a) it is probable (Topic 450) that future revenue at least equal to the cost will result from its inclusion in allowable costs and (b) the revenue is provided to recover the previously incurred cost rather than to fund expected similar future costs (980-340-25-1); a cost failing these criteria is recognized later when they are met, and is charged to earnings if it ceases to meet them (980-340-40-1).", "For a phase-in plan on a plant with no substantial physical construction before January 1, 1988, none of the allowable costs deferred by the regulator may be capitalized for financial reporting (980-340-25-2).", "For plants completed or substantially constructed before January 1, 1988, all deferred allowable costs are capitalized as a separate deferred charge only if all four criteria are met: a formal plan agreed to by the regulator, specified timing of recovery, recovery of all deferrals within 10 years of when deferrals begin, and scheduled percentage rate increases that do not grow year over year (980-340-25-3); failing any one criterion, none may be capitalized.", "An allowance for earnings on shareholders' investment is not an incurred cost that would otherwise be charged to expense and cannot be capitalized under 980-340-25-1; it may be capitalized only during construction or as part of a qualifying phase-in plan (980-340-25-5 through 25-6).", "A regulator's exclusion of a cost from allowable costs reduces the carrying amount of the related regulatory asset by the excluded amount, other assets being tested under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 (980-340-35-1); later allowance of previously excluded costs creates a new asset (980-340-35-2), and an indirect disallowance embedded in a phase-in plan is accounted for under Section 980-360-35 (980-340-35-4).", "Cumulative amounts capitalized under phase-in plans are reported as a separate balance sheet asset, and the net amount capitalized or recovered each period is reported as a separate item of other income or expense, not as a reduction of other expenses (980-340-45-1).", "Disclosure is required of the terms of all phase-in plans (including net amounts deferred for rate-making purposes under nonqualifying plans), of major costs recovered without a return on investment during the recovery period, and of any allowance for earnings on shareholders' investment capitalized for rate-making but not for financial reporting (980-340-50-1 through 50-3)." ], "categories": [ "Recognition", "Subsequent measurement", "Industry-specific", "Disclosure" ], "audience_level": "advanced", "student_note": "Regulated utilities are the classic exception to the rule that costs are expensed when incurred — a regulator's rate action can itself create an asset. The most common misunderstanding is assuming any regulator-ordered deferral can be capitalized: deferrals under phase-in plans for post-1988 plants are never capitalized for GAAP (only disclosed), and an allowance for earnings on shareholders' investment is never capitalized outside construction or a qualifying phase-in plan.", "related_topics": [ "980-10", "980-360", "980-835", "360-10", "450", "842-40" ], "key_concepts": [ "regulatory asset", "phase-in plan", "allowable costs", "rate spike", "allowance for earnings on shareholders' investment", "disallowance of plant costs", "regulatory lag", "mirror construction work in progress" ] } ``` Source downloaded (UTC): 2026-09-09T23:59:39.238Z to 2026-09-09T23:59:39.238Z Record version: sha256:207bbb8541473e1326f6958d391ba731f12ee183e98ee629514830616eba9e84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/980/#00-status) SEC content: no ##### [340-980-00-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:39.238Z to 2026-09-09T23:59:39.238Z Record version: sha256:cffcb148d6d8203901590f083308bea078c8ed42ebd782ec3dc165550a266ede 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
980-340-25-4AmendedAccounting Standards Update No. 2016-0202/25/2016
980-340-55-9 through 55-11
AmendedAccounting Standards Update No. 2016-0202/25/2016
980-340-55-13 through 55-17
AmendedAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:6501674c8ff8906cb4890de8f77d2bd70c07b85874275c2fefc4567656094c6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/980/#05-overview-and-background) SEC content: no ##### [340-980-05-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:29931d9c4af30ec4e4c3e637d45fbdad6cedb254aee72d89157a02a4201b6340 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for deferred costs for entities with regulated operations, including [phase-in plans](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity."). #### Phase-In Plans ##### [340-980-05-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:bde46a5b9a67b19034e47c0aeb1b3ec7985723318d7dd00c9049dc01e12edbdc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a utility places a newly completed plant in service, traditional rate-making procedures establish rates to recover the [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") of that plant. A combination of circumstances can cause traditional rate-making procedures to result in a phenomenon called rate spike, which is a major, one-time increase in rates that can result from the inclusion of the cost of new plants in rates under traditional rate-making procedures. ##### [340-980-05-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:43.170Z to 2026-09-09T23:59:43.170Z Record version: sha256:160ced30ad036066e1c6d30a63b9f71aac55b45b99c8da5bcde979d32ec20a0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Phase-in plans were developed to alleviate the problem of rate spike. Those plans are intended to moderate the initial increase in rates that would otherwise result from placing newly completed plants in service by deferring some of that rate increase to future years and providing the utility with return on investment for those deferred amounts. Instead of the traditional pattern of an increase in allowable costs followed by decreasing allowable costs for utility plants after the plants are placed in service, phase-in plans create a pattern of gradually increasing allowable costs for the initial years of the plant's service life. Source downloaded (UTC): 2026-09-09T23:59:46.985Z to 2026-09-09T23:59:46.985Z Record version: sha256:af231b867dee6af79db0757ef732043cbf6f78426fd5f22188ee3f8cf94e7ac4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/980/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-980-15-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:46.985Z to 2026-09-09T23:59:46.985Z Record version: sha256:5f9647448b8b603b9d6b3e3dcfc2d591d4a570ee1ab3faf8e67b52a844f07e34 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 980-10-15. Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:177f82a3f18420a0c3ed5df5278b3d3f3975fb8872376ffbb843681ccad5b022 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/980/#25-recognition) SEC content: no #### Effects of Regulation ##### [340-980-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:df3ae5a1e4c58f06af8ace762dc99cda3537e7d5efce7149bb35075d43df14dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Rate actions of a regulator can provide reasonable assurance of the existence of an asset. An entity shall [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") all or part of an [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") that would otherwise be charged to expense if both of the following criteria are met: 1. a It is probable (as defined in Topic 450) that future revenue in an amount at least equal to the capitalized cost will result from inclusion of that cost in [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") for rate-making purposes. 2. b Based on available evidence, the future revenue will be provided to permit recovery of the previously incurred cost rather than to provide for expected levels of similar future costs. If the revenue will be provided through an automatic rate-adjustment clause, this criterion requires that the regulator's intent clearly be to permit recovery of the previously incurred cost. A cost that does not meet these asset recognition criteria at the date the cost is incurred shall be recognized as a regulatory asset when it does meet those criteria at a later date. ##### [340-980-25-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:49bba16b0d774755e83fdbe2bf342493a7f5bafb9b85fdbd4d42d081430deb3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") is ordered by a regulator in connection with a plant on which no substantial physical construction had been performed before January 1, 1988, none of the allowable costs that are deferred for future recovery by the regulator under the plan for rate-making purposes shall be capitalized for general-purpose financial reporting purposes (hereinafter referred to as financial reporting). Allowable costs that are deferred for future recovery by the regulator under the plan consist of all allowable costs deferred for rate-making purposes under the plan beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. ##### [340-980-25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:d836d6e3b3a9bc5aba3414f7c8c6b1408110298d9ecb348dbca639122a89ec98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a phase-in plan is ordered by a regulator in connection with a plant completed before January 1, 1988, or a plant on which substantial physical construction had been performed before January 1, 1988, the following criteria shall be applied to that plan. If the phase-in plan meets all of those criteria, all allowable costs that are deferred for future recovery by the regulator under the plan shall be capitalized for financial reporting as a separate asset (a deferred charge). If any one of those criteria is not met, none of the allowable costs that are deferred for future recovery by the regulator under the plan shall be capitalized for financial reporting. The criteria to determine whether capitalization is appropriate are: 1. a The allowable costs in question are deferred pursuant to a formal plan that has been agreed to by the regulator. 2. b The plan specifies the timing of recovery of all allowable costs that will be deferred under the plan. 3. c All allowable costs deferred under the plan are scheduled for recovery within 10 years of the date when deferrals begin. 4. d The percentage increase in rates scheduled under the plan for each future year is no greater than the percentage increase in rates scheduled under the plan for each immediately preceding year. That is, the scheduled percentage increase in Year 2 is no greater than the percentage increase granted in Year 1, the scheduled percentage increase in Year 3 is no greater than the scheduled percentage increase in Year 2, and so forth. ##### [340-980-25-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:209bb496040e7a65596e6f7a913c2926a18fc0e224eb693aabe1d10b9e7f50f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Examples illustrate various circumstances that may or may not constitute phase-in plans: 1. a Example 1 (see paragraph [980-340-55-9](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-9)) illustrates a sale with leaseback as a finance lease. 2. b Example 2 (see paragraph [980-340-55-12](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-12)) illustrates a sale with leaseback as an operating lease. 3. c Example 3 (see paragraph [980-340-55-15](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-15)) illustrates a sale with leaseback with profit recognition accelerated. 4. d Example 4 (see paragraph [980-340-55-18](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-18)) illustrates the modified depreciation method. 5. e Example 5 (see paragraph [980-340-55-21](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-21)) illustrates deferred costs before a rate order is issued. 6. f Example 7 (see paragraph [980-340-55-39](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-39)) illustrates a phase-in plan for two plants completed at different times that share common facilities. ##### [340-980-25-5](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:aa74037f08c69d7334e2579e6671ce24a4ced037d99478526d2f239f96b8152b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If specified criteria are met, paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) requires capitalization of an incurred cost that would otherwise be charged to expense. An allowance for earnings on shareholders' investment is not an incurred cost that would otherwise be charged to expense. Accordingly, such an allowance shall not be capitalized pursuant to that paragraph. The phrase _an allowance for earnings on shareholders' investment_, as used in this Subtopic, is intended to have the same meaning as the phrase _a designated cost of equity funds_, used in paragraph [980-835-30-1](https://asc.understandingaccounting.org/asc/835/980/#835-980-30-1) , which, in specified circumstances, requires capitalization of an allowance for earnings on shareholders' investment (a designated cost of equity funds) during construction. ##### [340-980-25-6](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:52.933Z to 2026-09-09T23:59:52.933Z Record version: sha256:72e1daa50669e0639697f45625d7c538bda66daa8d4c204c71b33fa633760a42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) require capitalization of an allowance for earnings on shareholders' investment for qualifying phase-in plans. If an allowance for earnings on shareholders' investment is capitalized for rate-making purposes other than during construction or as part of a phase-in plan, the amount capitalized for rate-making purposes shall not be capitalized for financial reporting. For the requirement to accrue a carrying charge related to the expected recovery of the investment in abandoned assets, see paragraph [980-360-35-7](https://asc.understandingaccounting.org/asc/360/980/#360-980-35-7). Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:6aa0a8af44014f89295ad4801edd4fea3fab6771d613c17348d276cc111210e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/980/#35-subsequent-measurement) SEC content: no #### Effect of Rate Action on Asset Value ##### [340-980-35-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:e83d5460fbabb39a178fdad9264ed2e79d41519a0318a7cd427982eb74178593 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Rate actions of a regulator can reduce or eliminate the value of an asset. If a regulator excludes all or part of a cost from [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments."), the carrying amount of any asset recognized pursuant to paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) shall be reduced to the extent of the excluded cost. Whether other assets have been impaired shall be judged the same as for entities in general and the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 shall apply. ##### [340-980-35-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:2f00875ddafcb35c6cc63e92a4220d554a43c65b4b68f5021f6da9e9f30c6b50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a regulator allows recovery through rates of costs previously excluded from allowable costs, that action shall result in recognition of a new asset. The classification of that asset shall be consistent with the classification that would have resulted had those costs been initially included in allowable costs. #### Phase-In Plans ##### [340-980-35-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:8d76e94cb43529e4682436ce36a868699c9a83541b638a37792586cf87dfc6bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an existing [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") is modified or a new plan is ordered to replace or supplement an existing plan, the criteria in paragraph [980-340-25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3) shall be applied to the combination of the original plan and the new plan. The date when deferrals begin, used in applying the criterion in paragraph [980-340-25-3(c)](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3), would be the date of the earliest deferral under either the new or the old plan, and the final recovery date would be the date of the last recovery of all amounts deferred under the plans. ##### [340-980-35-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:54.927Z to 2026-09-09T23:59:54.927Z Record version: sha256:3a1726ed910791a9cedce1ca0c06260c1fa37981f96f4f279f5793520bd797d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A phase-in plan is a method of rate-making intended to moderate a sudden increase in rates while providing the regulated entity with recovery of its investment and a return on that investment during the recovery period. A disallowance is a rate-making action that prevents the regulated entity from recovering either some amount of its investment or some amount of return on its investment. Section 980-360-35 specifies the accounting for disallowances of plant costs. If a method of rate-making that meets the criteria of this Subtopic for a phase-in plan includes an indirect disallowance of plant costs, that disallowance shall be accounted for in accordance with that Section. Example 6 (see paragraph [980-340-55-33](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-33)) illustrates a phase-in plan with an indirect disallowance. Source downloaded (UTC): 2026-09-09T23:59:56.623Z to 2026-09-09T23:59:56.623Z Record version: sha256:8899c196b6a66ca75baf1fc6761fa01ebb376db339f8994dfbf956c17bb34249 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/340/980/#40-derecognition) SEC content: no ##### [340-980-40-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-40-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:56.623Z to 2026-09-09T23:59:56.623Z Record version: sha256:2ac54035078b1958a0a955d39fc8f8f736ac1c16bc4882c81571c717ec15a592 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If at any time an entity's [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") no longer meets the criteria for the capitalization of an incurred cost (see paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)), that cost shall be charged to earnings. Source downloaded (UTC): 2026-09-09T23:59:59.282Z to 2026-09-09T23:59:59.282Z Record version: sha256:4df2656036b005de96f20a5c730d38fb35acb220d240a691e7eec47ac8bf670f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/980/#45-other-presentation-matters) SEC content: no #### Phase-In Plans ##### [340-980-45-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:59.282Z to 2026-09-09T23:59:59.282Z Record version: sha256:e67c8e0aafbb3920907f249c53d0bd3c383d83f0ce8b197fa3955cb645b9af0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cumulative amounts capitalized under phase-in plans shall be reported as a separate asset in the balance sheet. The net amount capitalized in each period or the net amount of previously capitalized [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") recovered during each period shall be reported as a separate item of other income or expense in the income statement. Allowable costs capitalized shall not be reported as reductions of other expenses. Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:dcf07da05fc4bec9898e067ea1085c746bd1b5bc4527c648a7a8cd7213eaf1c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/980/#50-disclosure) SEC content: no #### Recovery of Cost Without Return on Investment ##### [340-980-50-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:259cc5a858969a9cec0ba0a6a275d346cf50be4490ea9d10941d9a54f830c463 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, a regulator may permit an entity to include a cost that would be charged to expense by an unregulated entity as an allowable cost over a period of time by amortizing that cost for rate-making purposes, but the regulator does not include the unrecovered amount in the rate base. That procedure does not provide a return on investment during the recovery period. If recovery of such major costs is provided without a return on investment during the recovery period, the entity shall disclose the remaining amounts of such assets and the remaining recovery period applicable to them. #### Phase-In Plans ##### [340-980-50-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:0bb86885549d42ec3b8b8b2e98ed901309f2cd0f6d1aa7fb76268d9d60c5b3e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The terms of any phase-in plans in effect during the year or ordered for future years shall be disclosed. This Subtopic does not permit capitalization for financial reporting of [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") deferred for future recovery by the regulator pursuant to a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") that does not meet the criteria of paragraph [980-340-25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-3) or a phase-in plan related to a plant on which substantial physical construction was not completed before January 1, 1988. Nevertheless, the financial statements shall include disclosure of the net amount deferred at the balance sheet date for rate-making purposes and the net change in deferrals for rate-making purposes during the year for those plans. #### Allowance for Earnings on Shareholders' Investment Capitalized for Rate-Making Purposes ##### [340-980-50-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:00.997Z to 2026-09-10T00:00:00.997Z Record version: sha256:470c28ea57a950ac61f6b06a9534576705c2b37e837125218b748a57a9cb8eb1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature and amounts of any allowance for earnings on shareholders' investment capitalized for rate-making purposes but not capitalized for financial reporting shall be disclosed. Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:5f21fee432f3310b2e878145c1caf89d6e27d9c25b9680beaa02fbf4328cd729 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-980-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/980/#55-implementation-guidance-and-illustrations) SEC content: no ##### [340-980-55-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:a61ee0d943735aa751e0c9ed4d34840f13a39ccddcb81b9f8847cd9c82c053ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance for application of this Subtopic to some specific situations, but does not address all possible applications of this Subtopic. All of the implementation guidance and illustrations assume that the entity meets the criteria in paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2); thus, recovery of any cost is probable if that cost is designated for future recovery by the regulator. #### Implementation Guidance ##### [340-980-55-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:f65c66b04bf236732d8dc7ddad610341af7c050eb9d81d67e567530485be1864 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, a regulator may approve rates that are intended to recover an [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") over an extended period without a return on the unrecovered cost during the recovery period. ##### [340-980-55-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:0d37545aa1f2c4d6b7a9ac3a1ac5fbb613e817964811bd4fcbb32ba5afd71b80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The regulator's action provides reasonable assurance of the existence of an asset (see paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)). Accordingly, the regulated entity would [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") the cost and amortize it over the period during which it will be allowed for rate-making purposes. That cost would not be recorded at discounted present value. An exception to this general rule is provided for costs of abandoned plants. See Example 1 (paragraph [980-360-55-2](https://asc.understandingaccounting.org/asc/360/980/#360-980-55-2)) for an illustration of accounting for future revenues expected to result from the cost of an abandoned plant. If the amounts are material, the disclosures specified in paragraph [980-340-50-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-50-1) would be furnished. ##### [340-980-55-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:209d41734e9ecc16d159f0fb04090cbf7e4ed21ef3598f19ca03e76ea7e7c632 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mirror construction work in progress is one means of moderating the sudden, one-time increase in rates that would otherwise result from placing a newly completed utility plant in service. Under mirror construction work in progress, increasing amounts of construction work in progress are included in the current rate base in the periods before the plant goes into service, providing the utility with a current return on a portion of its investment in construction while the construction proceeds. After the plant is placed in service, a decreasing amount of plant-in-service is excluded from the rate base each year, mirroring the pattern in which the construction was included in the rate base. The result of this procedure is to increase rates while the plant is under construction and to reduce the increase in rates in the initial years of the plant's service life. ##### [340-980-55-5](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:78c12ef5a3a57c2f21790e444566c1d0ef0d0d7c6818424406827f04b646942f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For rate-making purposes, no [allowance for funds used during construction](https://asc.understandingaccounting.org/glossary/a/#allowance-for-funds-used-during-construction "The cost of financing construction as financed partially by borrowings and partially by equity, capitalized as part of the cost of plant and equipment pursuant to requirements of the regulator.") is recognized on the portion of the construction that is included in the rate base while the asset is under construction, and an allowance for funds used during construction is recognized on the portion of the plant-in-service that is subsequently excluded from the rate base after the plant is placed in service. The same total amount is capitalized as if no construction had been included in the current rate base. ##### [340-980-55-6](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:838a9a1cdb2c939800d9cfb56f8f0d3ef1c57c77742141b1dba10244cafcd38c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The mirror construction work in progress arrangement described is not a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity.") under the definition used in this Subtopic because it does not defer recovery of costs that would not have been deferred under the methods of rate making used prior to 1982. Rather, it effectively provides a temporary loan from customers to the utility during construction and requires repayment of that loan after the plant is placed in service. ##### [340-980-55-7](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6f59294a76801a97ea8109dc886d5a841d1c3061adf98f455422057bbd01ade0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the arrangement is known to be a mirror construction work in progress arrangement at the time of the construction (for example, if that arrangement is required by law or has been specifically ordered by the regulator), an allowance for funds used during construction should be accrued on the total cumulative construction cost in each period for financial reporting. The revenue collected as a result of inclusion of construction in the current rate base should be recorded as a liability to customers, with disclosure of the approximate timing of the repayment that will be required under the mirror construction work in progress arrangement. ##### [340-980-55-8](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:d306b3d298c33b1e97abfed9451272ab2026213b73039c99b4247a653a968651 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the arrangement is not known to be a mirror construction work in progress arrangement when the construction is included in the rate base but the regulator later orders a mirror construction work in progress arrangement, the accounting described in the preceding paragraph should be implemented as soon as the nature of the arrangement becomes known. That will require an adjustment for the cumulative effect of the arrangement to date. An amount should be capitalized, with a corresponding accrual of an allowance for funds used during construction, when the mirror construction work in progress arrangement becomes known. Current revenues should be reduced by an equal amount, and a corresponding liability to customers should be recognized. That amount should be the amount that would have been capitalized if the arrangement had been known to be a mirror construction work in progress arrangement when the revenue was collected during construction. That capitalized amount should be reported in the year in which the mirror construction work in progress arrangement becomes known in the same manner as if it had been capitalized during construction. #### Illustrations ##### [340-980-55-9](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:4b3d066e2d3742c959c04d548fec6203e3b7f3d87fdd2a07b6e628c8d13b4029 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-10](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:31edf151fd9439084780976b512adbee68fdc5fb583f6ab8a9b074d9f07f8830 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility B sells its interest in a newly completed electric generating plant for an amount equal to its cost and leases that interest back under a lease that requires equal annual payments. The arrangement would not qualify for sale and leaseback accounting in accordance with Subtopic 842-40 because the leaseback would be classified as a finance lease. However, the arrangement previously qualified as a sale and a capital leaseback in accordance with Subtopic 840-40 before the effective date of Topic 842. Therefore, Utility B continues to account for the arrangement as a sale and a leaseback. Utility B's regulator includes the lease rentals in allowable cost as they accrue. In the past, Utility B's regulator has treated other leases entered into by Utility B in the same manner, but those leases were for much less significant items of equipment—not for an interest in an electric generating plant. ##### [340-980-55-11](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:439c834c96bc1a22dd2e4bdcadddb3b635125f26f6216a739b80e7b1a03d7ef2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method described is a phase-in plan under the definition in this Subtopic. Generally accepted accounting principles (GAAP) applicable to entities in general require a finance lease to be accounted for much like a purchase of the underlying asset. The resulting expense related to the lease consists of interest on the remaining lease obligation and depreciation based on the method used for similar owned assets. In the early years of a lease, the lease rentals included in allowable cost as they accrue are significantly less than the sum of interest on the lease obligation and depreciation on the leased asset. Thus, significant deferrals will result. The method also defers recognition of expenses compared with the methods of expense recognition used by Utility B's regulator for similar assets of Utility B prior to 1982 because Utility B's interests in electric generating plants were included in [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") in the past based on current provisions for depreciation and for the cost of capital invested in the plants. The use of this rate-making method in the past for leases of equipment does not change this conclusion. The definition is based on the method of rate-making used prior to 1982 for similar allowable costs. Similar allowable costs would be those resulting from electric generating plants. ##### [340-980-55-12](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:91e646cc0eb17852de5999ab019c21f045a6ac003560b24ca4a944977eb347f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-13](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:5d5941aa4b6a68e685e8e9b3d2a5a1536c9dd591fc3374797909d111f5169a3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility C sells its interest in a newly completed electric generating plant for an amount equal to its cost and leases that interest back under a lease that requires equal annual payments. The arrangement qualifies as a sale and a leaseback in accordance with Subtopic 842-20. The leaseback is classified as an operating lease. Utility C's regulator includes the lease payments in allowable cost as they accrue. In the past, Utility C's regulator has treated other leases entered into by Utility C in the same manner, but those leases were not for an interest in an electric generating plant. ##### [340-980-55-14](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:664337ea280e125603cbdc13db3f4134d65eece07417b2738123438416a2f4c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method applied to Utility C is not a phase-in plan under the definition in this Subtopic because it recognizes lease expense for rate-making purposes in the same way as that expense would be recognized for entities in general for this type of lease. ##### [340-980-55-15](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:21e4a1088e834bb87f8c7a8277f257a9fe59def46de576d2dc53246a07f41df2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-16](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:03cd832fb543a7e6f12c4299904c5fc1b74c07839c3c76a4ca500a2699c71d04 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility D sells its interest in a 5-year-old electric generating plant for an amount that exceeds its undepreciated cost by $500,000 and leases that interest back. The leaseback term is 20 years, and there are no renewal options. The arrangement would not qualify for sale and leaseback accounting in accordance with Subtopic 842-40 because the leaseback would be classified as a finance lease. However, the arrangement previously qualified as a sale and a capital leaseback in accordance with Subtopic 840-40 before the effective date of Topic 842. Therefore, Utility D continues to account for the arrangement as a sale and a leaseback. Utility D's regulator includes the lease payments in allowable cost as they accrue and orders Utility D to amortize the profit, for rate-making purposes, over 10 years. The sale occurred at a time when Utility D was about to place a newly completed plant in service. Utility D has not had any similar transactions in the past. ##### [340-980-55-17](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:556080aa0f1205c985f09411726d463defe1c3fcbc46774fa699eb481931f321 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method described is a phase-in plan under the definition in this Subtopic. GAAP applicable to entities in general at the time of entering into this arrangement required a profit on a sale and leaseback transaction to be amortized over the term of the leaseback. Amortization of that profit, for rate-making purposes, over 10 years when GAAP applicable to entities in general at that time required amortization over the 20-year leaseback term is equivalent to a deferral of allowable costs. In view of the timing of the rate order on the sale and leaseback transaction, the presumption is that the order was issued in connection with the newly completed plant. The method cannot be compared with methods in use prior to 1982 because Utility D has had no previous transactions of this type. ##### [340-980-55-18](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:0a675726b46d03b4557c220727fefb26c62e33feb767725a40f77111c3931ab4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) . ##### [340-980-55-19](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:1bc44d2bb13ccf0bcbd4eeeba27d87b10da2bd9cb318f741ff8ca88cf3830cd6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility E's regulator orders it to depreciate its new electric generating plant, for rate-making purposes, by using an annuity method. Under the method ordered, depreciation increases each year so that the total of depreciation and return on investment stays approximately level over the life of the plant. In the past, Utility E's regulator required the use of straight-line depreciation for electric generating plants. ##### [340-980-55-20](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6d429a89bb18c439c5ade1e711b355047faf38d8cd5f49c09e6a39a6392cabd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rate-making method applied to Utility E is a phase-in plan under the definition in this Subtopic because it meets both of the following conditions: 1. a It defers depreciation expense compared with the depreciation methods that are acceptable under GAAP applicable to entities in general (as indicated in paragraph [360-10-35-10](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-10), annuity methods of depreciation are not acceptable under GAAP applicable to entities in general). 2. b It defers depreciation expense compared with the method of depreciation used by Utility E's regulator for Utility E's electric generating plants prior to 1982. ##### [340-980-55-21](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:5d5612108b05a0b1385054b4b76497121496d96650aec68e5a54494cfe3a1e8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [980-340-25-2 through 25-3](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) and [980-340-35-3 through 35-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-3) related to the deferral of costs before a rate order is issued when: 1. a Utility F has deferred costs before a rate order is issued (Case A). 2. b Utility F has deferred costs before a rate order is issued and has subsequent interaction with a disallowance (Case B). 3. c Utility G has deferred costs before a rate order is issued and has interaction with a subsequent phase-in plan (Case C). ##### [340-980-55-22](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:f52ee6d173d05a8b59fd6c0f6cbd2fb7c518503cc19acfec857230152d962bc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C share all of the assumptions described in the following paragraph. ##### [340-980-55-23](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:985731230b969a1e4cfb290c86eb6991bbaa2ba398298bb2044f90f31a55fac1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility F completes construction of a nuclear generating plant and places that plant in service. Utility F's regulator decides that it will complete its examination of the prudence of Utility F's construction cost before rates are adjusted to reflect the cost of operating the plant. During the examination and until rates are adjusted, the regulator orders Utility F to capitalize its net cost of operating the plant (operating costs, depreciation, allocable interest cost, and an allowance for earnings on shareholders' investment, all net of savings that result from operation of the new plant). ##### [340-980-55-24](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6e335be772d792c2e4e65d88cf263b88801266e9a6e5f44dbe8b4b053a81ea8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The resulting deferral is not a phase-in plan under the definition in this Subtopic. The regulator's order to capitalize an amount pending completion of a rate hearing is designed to protect the utility from the effects of regulatory lag in the absence of a rate order—a routine procedure on the part of regulators. Regulatory lag is the delay between a change in a regulated entity's costs and a change in rates ordered by a regulator as a result of that change in costs. A shortfall in a utility's net income can occur when regulators set rates prospectively and the estimated or test-period costs on which those rates were based are less than the actual costs that are incurred during the period covered by those rates. Regulators' actions that are designed to protect a utility from the effects of regulatory lag can occur during a rate case but before a rate order is issued, as in this Case, and when no rate case is under active consideration. An accounting order to a utility to capitalize the cost of repairing storm damage would be an example of the latter situation. Those actions can also be a part of a rate order. An example of that type of action would be a fuel adjustment clause that is intended to protect the utility from the effects of unanticipated changes in fuel costs. ##### [340-980-55-25](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:6f4053382f72317ab3bc85715565371e056eb7db734a33a0b75676d1c2ddfa03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The definition of a phase-in plan in this Subtopic is not intended to encompass actions of a regulator that are designed to protect a utility from the effects of regulatory lag in the absence of a rate order, nor is it intended to encompass the regulator's subsequent treatment of any allowable costs that result from those actions. ##### [340-980-55-26](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:39b48fb26599e3318d4fd2a0dd918c6b6ea2ce7b07a2e415381f5f0b1e4b9d53 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1), Utility F should capitalize that portion of the amount capitalized for rate-making purposes that represents incurred costs that would otherwise be charged to expense, provided that it is probable that future revenue in an amount at least equal to the capitalized cost will result from inclusion of those costs in allowable costs for rate-making purposes. Otherwise, Utility F should not capitalize those costs. ##### [340-980-55-27](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:8005a2c7663087d791b9daa33f53a2b33fd16b2162889b36a39abb7a55e17bfd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Since the situation in this Case is neither during construction nor a phase-in plan, this Topic does not permit capitalization of an allowance for earnings on shareholders' investment. Accordingly, Utility F should not capitalize, for financial reporting, the portion of the amount capitalized for rate-making purposes that represents an allowance for earnings on shareholders' investment. If recovery of that allowance subsequently occurs, increased earnings during the recovery period will result. ##### [340-980-55-28](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-28) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:cb3ef723b456ac67d3b93c1bf066705217b5427361e2a5535681e87b90b56d3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Six months after the accounting order referred to in Case A, Utility F's regulator approves part of the cost of the new plant but disallows $600,000,000—consisting of construction expenditures of $570,000,000 and amounts capitalized for rate-making purposes during this 6-month operating period prior to the rate order of $30,000,000. The recorded cost of the plant before consideration of the disallowance is $4,500,000,000. During this 6-month period, Utility F has capitalized $500,000,000 of net cost for rate-making purposes. This $500,000,000 consists of an allowance for earnings on shareholders' investment of $200,000,000 and incurred costs that would otherwise be charged to expense of $300,000,000. For rate-making purposes, the balance sheet accounts, before and after the disallowance, are as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-56069F69-1063-4D20-BC46-C30E4843DEAA-low.gif) Balance before Disallowance Disallowance (in thousands) Balance after Disallowance Plant in service " $4,500,000 " " $(570,000)" " $3,930,000 " Amounts capitalized pending rate order " 500,000 " " (30,000)" " 470,000 " Combined totals " $5,000,000 " " $(600,000)" " $4,400,000 " ##### [340-980-55-29](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-29) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:3bc33c69e717e92172251e4e4b41b6dc58f619395f712cd2add24e1bc1baed5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 980-360-35 requires a disallowance of plant costs to be recognized as a loss. Utility F should perform the following analysis to determine the loss that should be recognized and how it will be allocated: 1. a Assuming that $300,000,000 of the $500,000,000 capitalized for rate-making purposes during the 6-month period was also capitalized for financial reporting (the $200,000,000 allowance for earnings on shareholders' investment would not be capitalized), the total loss recognized by Utility F for financial reporting should be the amount that reduces the combined total of plant in service and amounts capitalized pending rate order ($4,800,000,000) to the combined total that will be honored for rate-making purposes ($4,400,000,000). The recognizable loss is $400,000,000. 2. b Utility F should allocate to plant in service the lesser of the amount of the disallowance that was allocated to plant in service by the regulator ($570,000,000) or the total disallowance recognized for financial reporting ($400,000,000), or $400,000,000. 3. c Utility F should allocate the rest of the disallowance recognized for financial reporting, if any, to amounts capitalized pending rate order. In this case, no amount is allocated to that asset. ##### [340-980-55-30](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-30) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:0ff4443ace1a7a7b1c0f6ffaea66bec9cf958b057cba7841f3cfa54fc8e37ad7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The recognition of the disallowance and the effect of that recognition on the financial reporting balance sheet accounts are as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-B4BFDE34-C467-4D33-BF36-D415AB03CC27-low.gif) Balance before Disallowance Recognition of Disallowance (in thousands) Balance after Disallowance Plant in service " $4,500,000 " " $(400,000)" " $4,100,000 " Amounts capitalized pending rate order " 300,000 " " 300,000 " Combined totals " $5,000,000 " " $(400,000)" " $4,400,000 " ##### [340-980-55-31](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-31) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:3ef5c385e9ca55fcc8695f0bedb60a186348c38f8281cd229a3350a6b1800ef4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility G's fact situation is identical to that of Utility F, described in Cases A and B, except that Utility G's regulator approves all of the costs related to the newly completed plant. Utility G's regulator adopts a formal phase-in plan intended to provide recovery of amounts deferred under the plan and amounts capitalized, for rate-making purposes, during the six-month period from the plant's in-service date to the date of the rate order. ##### [340-980-55-32](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-32) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:3a0c494a8bf37b4da6635e28186f2bef5038745ab61eed842b0eb4c1aa417358 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The phase-in plan does not affect the financial reporting of those previously deferred costs described in paragraphs [980-340-55-26 through 55-27](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-26) , nor does the existence of those previously deferred costs affect the financial reporting of the phase-in plan. Accordingly, the allowance for earnings on shareholders' investment that was not capitalized previously during the period preceding issuance of the rate order may not be capitalized upon adoption of the phase-in plan. ##### [340-980-55-33](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-33) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:fbda37767fcdc313892f55dac2737272c41d20ef2e7cfe396a7f140c04e45b5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraph [980-340-35-4](https://asc.understandingaccounting.org/asc/340/980/#340-980-35-4). ##### [340-980-55-34](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-34) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:c14feafb41cef3eb77cfdb1121339a0eda3f7d1c95b9259ecda65b042d89601a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility A is an electric utility that operates solely in a single-state jurisdiction. On January 1, 19X1, Utility A's new electric generating plant becomes operational. The cost of that plant is $1 billion. ##### [340-980-55-35](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-35) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:e4148199dff8892585559c86aedf608a4a335214ecb06e69b4e1a622a91cce17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Utility A's regulator orders that the costs of the newly completed plant be phased in over a three-year period, as follows: 1. a 19X1—A portion of the return (interest and an allowance for earnings on shareholders' investment) on unrecovered investment is deferred by excluding 25 percent of the cost of the plant from the rate base. 2. b 19X2—All of the remaining cost of the plant is to be included in the rate base with no recovery of previously deferred amounts. 3. c 19X3—All of the remaining cost of the plant is to be included in the rate base. Also, additional revenue is to be provided equal to the return on unrecovered investment excluded from rates in Year 1. The order does not provide for recovery in any year of a return on Utility A's investment in the deferred amounts. Utility A's weighted-average cost of capital in its latest rate case was 11 percent. ##### [340-980-55-36](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-36) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:8481dd99dca573133d90eedfd7676d28479b1e86c976fb8f05a60e1ac1428400 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The phase-in plan is partially a disallowance of plant costs because no return on investment is provided for the deferred amounts. That disallowance should be recognized in accordance with Section 980-360-35 when it became probable. The amount of equivalent cost disallowed should be determined as shown in Schedule 1. The recorded cost of the plant should be reduced by that amount, and a corresponding loss should be reported in 19X1. ##### [340-980-55-37](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-37) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:9a510f9d64f460eb778658ef819626d9855b01a00420a80eed4fb1e9f1285db0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disallowance will reduce revenues only in Years 1 through 3, so the depreciation charge that would otherwise be recognized for that plant in Years 1 through 3 should be reduced by the amount of the effective disallowance attributable to those years (the amount in column 4 of Schedule 1). Amounts deferred under the plan (the amount for months 1-12 in column 1 of Schedule 1) should be capitalized as a separate asset, and that asset should be amortized as recovery occurs (in months 25-36), using the amounts in column 1 of Schedule 1. ##### [340-980-55-38](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-38) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:947b4e48a44cf1b5f53daf5aacb9f29c0d3cafd84f2937a9ea15bcebe72d24e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates the determination of effective disallowance. - ![](https://asc.understandingaccounting.org/asc-img/GUID-BCE46570-EA8B-4AE2-A04F-02C032A90ABC-low.gif) Schedule 1 Utility A Determination of Effective Disallowance Return on Investment Disallowed for Amounts Deferred under Phase-in Plan (in thousands) (1) (2) (3) (4) Month Cost Deferral (Recovery) Cumulative Amount Deferred Return on Investment on Cumulative Deferral Effective Disallowance 1 " $2,292 " " $2,292 " $21 $- 2 " 2,291 " " 4,583 " 42 21 3 " 2,292 " " 6,875 " 63 41 4 " 2,292 " " 9,167 " 84 61 5 " 2,291 " " 11,458 " 105 80 6 " 2,292 " " 13,750 " 126 99 7 " 2,292 " " 16,042 " 147 118 8 " 2,291 " " 18,333 " 168 137 9 " 2,292 " " 20,625 " 189 155 10 " 2,292 " " 22,917 " 210 173 11 " 2,291 " " 25,208 " 231 190 12 " 2,292 " " 27,500 " 252 207 13 - " 27,500 " 252 224 14 - " 27,500 " 252 222 15 - " 27,500 " 252 220 16 - " 27,500 " 252 218 17 - " 27,500 " 252 216 18 - " 27,500 " 252 214 19 - " 27,500 " 252 212 20 - " 27,500 " 252 210 21 - " 27,500 " 252 208 22 - " 27,500 " 252 206 23 - " 27,500 " 252 204 24 - " 27,500 " 252 202 25 " (2,292)" " 25,208 " 231 201 26 " (2,291)" " 22,917 " 210 182 27 " (2,292)" " 20,625 " 189 164 28 " (2,292)" " 18,333 " 168 146 29 " (2,291)" " 16,042 " 147 129 30 " (2,292)" " 13,750 " 126 112 31 " (2,292)" " 11,458 " 105 95 32 " (2,291)" " 9,167 " 84 78 33 " (2,292)" " 6,875 " 63 62 34 " (2,292)" " 4,583 " 42 46 35 " (2,291)" " 2,292 " 21 31 36 " (2,292)" - - 15 Total loss to be recognized in 19X1 " $5,099 " Computations: Column (1)—Cost of plant ($1 billion) × .25 × 11% ÷ 12 Column (2)—Column (2) for prior month + Column (1) for current month Column (3)—Column (2) × 11% ÷ 12 Column (4)—Present value (at beginning of month 1) at 11% (.9167 per month) of amount in Column (3) for prior month ##### [340-980-55-39](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-39) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:2123d5e6e32044864c11772d2f63014402b24159632f6f803f013e017819a4ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraph [980-340-25-2](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-2) and the application of the definition of a [phase-in plan](https://asc.understandingaccounting.org/glossary/p/#phase-in-plan "Any method of recognition of allowable costs in rates that meets all of the following criteria: The method was adopted by the regulator in connection with a major, newly completed plant of the regulated entity or of one of its suppliers or a major plant scheduled for completion in the near future. The method defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The method defers the rates intended to recover allowable costs beyond the period in which those rates would have been ordered under the rate-making methods routinely used prior to 1982 by that regulator for similar allowable costs of that regulated entity."). ##### [340-980-55-40](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-40) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:bbc536eb170394491f460b3dccdd9e50ee1e436f72acac8419e5af2e993c65c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A utility that meets the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) for application of this Topic constructs two generating plants on a common site and those plants share certain facilities (primarily coal handling equipment, transmission facilities, and an administrative building). One plant (Unit 1) is completed January 31, 19X1, and the other plant (Unit 2) is completed December 31, 19X1. The coal handling equipment, transmission facilities, and administrative building are completed by January 31, 19X1, and are used by Unit 1 during 19X1. ##### [340-980-55-41](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-41) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:1edcdb61067cf1a5ef7dbdc2481b4c29481adb617d94b4aeed63e9f546d71dcf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. New rates are placed in effect on February 1, 19X1, that include the effect on revenue requirements of Unit 1 and one-half of the coal handling equipment, transmission facilities, and administrative building. New rates are again placed in effect on January 1, 19X2, to include the effect on revenue requirements of Unit 2 and the other half of the coal handling equipment, transmission facilities, and administrative building. ##### [340-980-55-42](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-42) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:c996f7c95ebaf4a92aff2b663946a4583d5cf62564d1396d194c44065dd7ffba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consistent with the above rate treatment, the utility capitalizes interest on and does not depreciate one-half of the coal handling equipment, transmission facilities, and administrative building from January 31 to December 31, 19X1. The question is whether deferral of depreciation and continued capitalization of interest on one-half of the coal handling equipment, transmission facilities, and administrative building is a phase-in plan under Subtopic 980-340. ##### [340-980-55-43](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-43) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:f0eeb12596838e6aa0b8ab233c15726597d1abf00ca99ee2dd1cc433af6e2d05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This deferral represents a phase-in plan unless that rate treatment was routinely used before 1982 by that regulator for similar allowable costs of that regulated entity. The definition of a phase-in plan provides that a phase-in plan defers the rates intended to recover allowable costs beyond the period in which those allowable costs would be charged to expense under generally accepted accounting principles (GAAP) applicable to entities in general. The interest capitalization period should end and depreciation for the common facilities should begin on February 1, 19X1. Assuming the depreciation pattern for those facilities that results from the above rate-making treatment is not a rational and systematic method of depreciation that would be acceptable for an entity in general, that deferral of depreciation and interest is a phase-in plan. If the depreciation pattern for those facilities that results from the above treatment is a rational and systematic method of depreciation that would be acceptable for an entity in general, only the deferral of the interest is a phase-in plan. ##### [340-980-55-44](https://asc.understandingaccounting.org/asc/340/980/#340-980-55-44) Pending content: no Source downloaded (UTC): 2026-09-10T00:00:02.737Z to 2026-09-10T00:00:02.737Z Record version: sha256:8dca4346ec5c379750a64ee17dbd2ba2ae0d95fcf428fec3691df8bee30eb02c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 980-340 provides an exception to the definition of a phase-in plan for the effects of regulatory lag. However, regulatory lag ends for a utility's newly completed plant with the first rate order that both: 1. a Is effective after the in-service date of that plant 2. b Addresses the costs of that plant. Therefore, even if different portions of the cost of a unit of property (for example, transmission facilities) are considered for rate treatment in successive rate filings under the notion of regulatory lag, it creates a phase-in plan.