ASC

ASC 350-950

Financial Services—Title Plant

350 Intangibles—Goodwill and Other

Download JSONDownload Markdown19 paragraphs · 7 sectionsJump to summary

Source downloaded: .Record version ea42a7a60762. Effective date must be checked in the source.

In brief

IntermediateRecognitionInitial measurementSubsequent measurementImpairment

ASC 350-950 governs accounting for title plants — the indexed historical records of land ownership, encumbrances, maps, and prior title reports used by title insurers, abstract entities, and title agents. Costs directly identifiable with constructing a title plant (and purchased title plants, recorded at cost/fair value of consideration given) are capitalized, while maintenance and title search costs are expensed as incurred. Capitalized title plant is not amortized or depreciated; it is carried indefinitely unless impaired under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10.

Key points (7)
  • Costs incurred to construct a title plant are capitalized only if directly related to, and properly identified with, the construction activities (350-950-25-1); capitalizable costs are those to obtain, organize, and summarize historical information until the plant can be used for title searches (350-950-30-1).
  • A purchased title plant, including a purchased undivided interest, is recorded at cost at the date of acquisition, measured for a separate acquisition by the fair value of the consideration given (350-950-25-2; 350-950-30-2).
  • Costs to maintain a title plant (daily updating) and to perform title searches are expensed as incurred (350-950-25-2); backplant construction costs must be identifiable to be capitalized (350-950-25-2).
  • Costs incurred after the title plant is operational to convert information between storage and retrieval systems or to modify/modernize the system are not capitalized as title plant (350-950-25-3), but may be capitalized separately (350-950-25-4) and then charged to expense in a systematic and rational manner (350-950-35-4).
  • Capitalized title plant costs are not depreciated or charged to income unless circumstances indicate impairment (350-950-35-1); indicators include changes in legal requirements, obsolescence, competitor actions, failure to maintain the plant currently, and abandonment (350-950-35-2), with Subtopic 360-10 impairment provisions applying (350-950-35-3).
  • On sale with relinquishment of all rights to future use, gain or loss equals the amount to which the entity is entitled under Subtopic 610-20 net of the adjusted cost of the title plant (350-950-40-1(a)); sale of an undivided interest yields gain or loss of the amount received net of a pro rata portion of adjusted cost (350-950-40-1(b)).
  • Sale of a copy of the title plant or the right to use it is revenue under Topic 606 if with a customer (otherwise Subtopic 610-20), and ordinarily no cost is allocated unless the plant's value falls below its adjusted cost as a result of the sale (350-950-40-1(c)).

For students. Title plant is the classic example of a capitalized asset that is never amortized — the common mistake is assuming an intangible with a long life must be amortized; here the only write-down comes through ASC 360-10 impairment. Also distinguish construction costs (capitalize) from maintenance and title search costs (expense), and from post-operational storage/retrieval system costs (capitalize separately and expense systematically).

title plantbackplantcapitalization of construction coststitle plant maintenancetitle searchesno amortizationimpairment indicatorsundivided ownership interest

Machine-generated study aid for ASC 350-950. Check the source paragraphs below.

350-950-00Status

Source downloaded: .Record version 922d9c0fadf6. Effective date must be checked in the source.

350-950-00-1
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
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
950-350-40-1AmendedAccounting Standards Update No. 2014-0905/28/2014

350-950-05Overview and Background

Source downloaded: .Record version 4068d2ff8621. Effective date must be checked in the source.

350-950-05-1
This Subtopic addresses the accounting and reporting for title plant and related intangible assets.
350-950-05-2
A title plant consists of all of the following:
  1. a
    Indexed and catalogued information for a period concerning the ownership of, and encumbrances on, parcels of land in a particular geographic area
  2. b
    Information relating to persons having an interest in real estate
  3. c
    Maps and plats
  4. d
    Copies of prior title insurance contracts and reports
  5. e
    Other documents and records.
350-950-05-3
A title plant constitutes a historical record of all matters affecting title to parcels of land in a particular geographic area. The number of years covered by a title plant varies, depending on regulatory requirements and the minimum information period considered necessary to issue title insurance policies efficiently.
350-950-05-4
An entity may decide to construct or purchase a title plant that antedates the period covered by its existing title plant (backplant).
350-950-05-5
Title plant maintenance involves the updating of the title plant on a daily or other frequent basis by adding both of the following:
  1. a
    Reports on the current status of title to specific parcels of real estate
  2. b
    Other documents, such as records relating to security or other ownership interests.
350-950-05-6
Title searches involve the process of searching through records for all recorded documents or updating information summarized in the most recently issued title report.

350-950-15Scope and Scope Exceptions

Source downloaded: .Record version e69c5181df12. Effective date must be checked in the source.

Entities

350-950-15-1
The guidance in this Subtopic applies to all entities that use a title plant in their operations. Those entities include, but are not limited to:
  1. a
    Title insurance entities (underwriters)
  2. b
    Title abstract entities
  3. c
    Title agents.

350-950-25Recognition

Source downloaded: .Record version 26d6714aed38. Effective date must be checked in the source.

Title Plant

350-950-25-1
Costs incurred to construct a title plant shall be capitalized. To qualify for capitalization, costs need to be directly related to, and properly identified with, the activities necessary to construct the title plant.
350-950-25-2
A purchased title plant, including a purchased undivided interest in a title plant, shall be recorded at the date of acquisition. Costs to construct a backplant need to be identifiable to qualify for capitalization. Costs incurred to maintain a title plant and to do title searches shall be expensed as incurred.

Storage and Retrieval

350-950-25-3
The following costs incurred after a title plant is operational shall not be capitalized as title plant:
  1. a
    Costs to convert the information from one storage and retrieval system to another
  2. b
    Costs to modify or modernize the storage and retrieval system.
350-950-25-4
Those costs, however, may be capitalized separately.

350-950-30Initial Measurement

Source downloaded: .Record version 2d152926c54a. Effective date must be checked in the source.

350-950-30-1
Title plant costs to be capitalized include the costs incurred to obtain, organize, and summarize historical information in an efficient and useful manner until the title plant can be used by the entity to do title searches.
350-950-30-2
A purchased title plant, including a purchased undivided interest in title plant, shall be recorded at cost. For a title plant acquired separately, cost shall be measured by the fair value of the consideration given.

350-950-35Subsequent Measurement

Source downloaded: .Record version d80689d17ff0. Effective date must be checked in the source.

Title Plant

350-950-35-1
Capitalized costs of a title plant shall not be depreciated or charged to income unless circumstances indicate that the carrying amount of the title plant has been impaired.
350-950-35-2
The following circumstances may indicate that the carrying amount of title plant has been impaired:
  1. a
    Changes in legal requirements or statutory practices
  2. b
    Effects of obsolescence, demand, and other economic factors
  3. c
    Actions of competitors and others that may affect competitive advantages
  4. d
    Failure to maintain the title plant properly on a current basis
  5. e
    Abandonment of the title plant or other circumstances that indicate obsolescence.
350-950-35-3
Those events or changes in circumstances, in addition to the examples in paragraph 360-10-35-21, indicate that the carrying amount of the capitalized costs may not be recoverable. Accordingly, the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 apply.

Storage and Retrieval

350-950-35-4
Capitalized storage and retrieval costs (addressed in paragraph 950-350-25-3) incurred after a title plant is operational shall be charged to expense in a systematic and rational manner.

350-950-40Derecognition

Source downloaded: .Record version 33653b616f75. Effective date must be checked in the source.

350-950-40-1
The sale of a title plant shall be reported separately as follows:
  1. a
    If an entity sells its title plant and relinquishes all rights to its future use, the reported gain or loss shall be recognized at the amount to which the entity is entitled in accordance with Subtopic 610-20 on the gains and losses from the derecognition of nonfinancial assets net of the adjusted cost of the title plant.
  2. b
    If an entity sells an undivided ownership interest in its title plant (that is, the right to its joint use), the reported gain or loss shall be the amount received net of a pro rata portion of the adjusted cost of the title plant.
  3. c
    If an entity sells a copy of its title plant or the right to use it, the recognized revenue, if in a contract with a customer, shall be accounted for in accordance with Topic 606 on revenue from contracts with customers. If the contract is not with a customer, the gain or loss shall be accounted for in accordance Subtopic 610-20. Ordinarily, no cost shall be allocated to the sale of a copy of or the right to use a title plant unless the value of the title plant decreases below its adjusted cost as a result of the sale (see paragraph 950-350-35-1).

Related subtopics