# ASC Topic 420: Exit or Disposal Cost Obligations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/420/) 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): 2026-09-10T00:22:32.182Z to 2026-09-10T00:23:24.442Z Record version: sha256:23a1cfee70981de6696c79d16879ab023832ce80c856c507fc9d5d389efcaf4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 420 governs liabilities for costs of exit or disposal activities (restructurings) — one-time involuntary employee termination benefits, costs to terminate non-lease contracts, and other associated costs like facility closure and relocation. Its central idea is that a liability is recognized only when it is incurred, i.e., when a present obligation exists, and is measured initially at fair value; merely committing to an exit plan is not the requisite past event (420-10-25-1 through 25-2, 420-10-30-1). Timing rules turn on facts: one-time termination benefits are recognized at the communication date if no future service is required (or service will not extend beyond the minimum retention period, capped at the legal notification period or 60 days), but are recognized ratably over the service period if employees must render service beyond that period (420-10-25-7 through 25-9, 30-5, 30-6); contract termination costs are recognized on termination or at the cease-use date for costs continuing with no economic benefit (420-10-25-11 through 25-13). Subsequent revisions in cash flow timing or amount are remeasured using the original credit-adjusted risk-free rate, and passage-of-time changes are accretion expense, not interest cost (420-10-35-1 through 35-4, 45-5), with extensive disclosure including a rollforward by major cost type (420-10-50-1). Source downloaded (UTC): 2026-09-10T00:22:32.182Z to 2026-09-10T00:23:24.442Z Record version: sha256:7aefdb62ec7e822b31791f015e57988366fcc53a0e37c9ae4c5a5f7ce613441d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10: Exit or Disposal Cost Obligations — Overall ### Machine-generated study aids ```json { "summary": "ASC 420-10 governs when and how an entity recognizes and measures liabilities for costs of exit or disposal activities (restructurings), including one-time involuntary employee termination benefits, costs to terminate non-lease contracts, and other associated costs such as facility closures and employee relocation. The core rule is that a liability is recognized only when it is incurred — i.e., when a present obligation exists — and measured initially at fair value; a mere commitment to an exit or disposal plan is not the requisite past event (420-10-25-1 through 25-2, 420-10-30-1). Ongoing termination-benefit arrangements, pension/OPEB special termination benefits, deferred compensation, stock compensation, and asset retirement obligations are excluded and handled under other Topics (420-10-15-5 through 15-6).", "key_points": [ "A liability for exit or disposal costs is recognized in the period incurred and measured initially at fair value; commitment to a plan alone does not create a liability, and expected future operating losses are recognized only as incurred (420-10-25-1 through 25-3, 420-10-30-1).", "A one-time termination benefit arrangement exists at the communication date only when management with authority commits to the plan, the plan identifies the number, job classifications/functions, and locations of employees and expected completion date, sets benefit terms in sufficient detail, and significant changes or withdrawal are unlikely (420-10-25-4).", "If employees need not render service to receive benefits, or will not be retained beyond the minimum retention period (not to exceed the legal notification period or, absent one, 60 days), the liability is recognized and measured at fair value at the communication date (420-10-25-7 through 25-8, 420-10-30-5).", "If employees must render service beyond the minimum retention period, the liability is measured initially at the communication date based on the fair value of the liability as of the termination date and recognized ratably over the future service period (420-10-25-9, 420-10-30-6).", "Contract termination costs (excluding Topic 842 leases) are recognized when the entity terminates the contract per its terms, and costs continuing without economic benefit are recognized and measured at fair value at the cease-use date (420-10-25-11 through 25-13, 420-10-30-7, 30-9); other associated costs are recognized when goods or services are received (420-10-25-15).", "Subsequent changes from revisions in timing or amount of cash flows are measured using the credit-adjusted risk-free rate used initially, with the cumulative effect adjusted in the period of change; passage-of-time changes are accretion expense, which is not interest cost under Subtopic 835-20 (420-10-35-1 through 35-4, 420-10-45-5).", "Disclosure must include a description of the activity, expected completion date, amounts expected/incurred/cumulative and a liability rollforward by major cost type, the income statement line items, reportable segment amounts, and any liability not recognized because fair value cannot be reasonably estimated (420-10-50-1)." ], "categories": [ "Recognition", "Initial measurement", "Compensation and benefits", "Disclosure" ], "audience_level": "intermediate", "student_note": "Exam questions almost always hinge on the timing trigger: announcing a restructuring plan does not create a liability, and a stay-bonus arrangement requiring service beyond the minimum retention period is accrued ratably rather than all at the communication date. The other classic trap is distinguishing a one-time arrangement (ASC 420) from an enhancement to an ongoing severance plan or a past practice (ASC 712, probable-and-estimable model).", "related_topics": [ "712-10", "715-30", "715-60", "205-20", "842-20", "410-20" ], "key_concepts": [ "one-time employee termination benefits", "communication date", "minimum retention period", "cease-use date", "contract termination costs", "credit-adjusted risk-free rate", "accretion expense", "exit or disposal plan" ] } ``` Source downloaded (UTC): 2026-09-10T00:22:32.182Z to 2026-09-10T00:22:32.182Z Record version: sha256:6f9a16e4321ec488206ca91526492426e9381aaab3802fc1931903633b471839 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/420/10/#00-status) SEC content: no ##### [420-10-00-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:32.182Z to 2026-09-10T00:22:32.182Z Record version: sha256:a6798635bc9ad59f1388d23b62cc9d18c8f2b5bcecb0ee8e4c36d3b77c088d9b 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
AcquirerAmendedAccounting Standards Update No. 2025-0305/12/2025
Acquisition by a Not-for-Profit EntityAddedAccounting Standards Update No. 2010-0701/28/2010
BusinessAmendedAccounting Standards Update No. 2017-0101/05/2017
Cease-Use DateAmendedMaintenance Update 2020-18 (PDF)11/25/2020
ContractAddedAccounting Standards Update No. 2016-0202/25/2016
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Variable Interest EntitySupersededAccounting Standards Update No. 2025-0305/12/2025
420-10-05-2AmendedAccounting Standards Update No. 2016-0202/25/2016
420-10-15-3AmendedMaintenance Update 2021-09 (PDF)08/20/2021
420-10-15-3AmendedAccounting Standards Update No. 2016-0202/25/2016
420-10-15-3AmendedAccounting Standards Update No. 2010-0701/28/2010
420-10-25-2AmendedAccounting Standards Update No. 2024-0203/29/2024
420-10-25-11AmendedAccounting Standards Update No. 2016-0202/25/2016
420-10-25-13AmendedMaintenance Update 2018-12 (PDF)09/10/2018
420-10-30-8SupersededAccounting Standards Update No. 2016-0202/25/2016
420-10-30-9AmendedMaintenance Update 2018-12 (PDF)09/10/2018
420-10-45-3AmendedAccounting Standards Update No. 2015-0101/09/2015
420-10-50-1AmendedAccounting Standards Update No. 2025-1112/08/2025
420-10-50-1AmendedAccounting Standards Update No. 2024-0311/04/2024
420-10-55-11 through 55-15
SupersededAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-10T00:22:34.049Z to 2026-09-10T00:22:34.049Z Record version: sha256:bdb00bbe555ce8367c0bd7bb1d3e45acf29a870a5d24bd168908a78b19b780f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/420/10/#05-overview-and-background) SEC content: no ##### [420-10-05-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:34.049Z to 2026-09-10T00:22:34.049Z Record version: sha256:71d31a7628be68cdb7a344bf1db6b2903768cae00d879bfaaf093d8e3bbbc490 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Exit or Disposal Cost Obligations Topic addresses financial accounting and reporting for costs associated with exit or disposal activities. An exit activity includes but is not limited to a [restructuring](https://asc.understandingaccounting.org/glossary/r/#restructuring "A program that is planned and controlled by management, and materially changes either the scope of a business undertaken by an entity, or the manner in which that business is conducted, as defined by the International Accounting Standard No. 37 in 2002."). ##### [420-10-05-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:34.049Z to 2026-09-10T00:22:34.049Z Record version: sha256:c104282a270fdfb76237f9af7fd5bb8cd0a351b8d64d243e799c3a7151e9f407 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Those costs include, but are not limited to, the following: 1. a Involuntary employee termination benefits pursuant to a one-time benefit arrangement that, in substance, is not an ongoing benefit arrangement or an individual deferred compensation contract 2. b Costs to terminate a contract that is not a [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.") 3. c Other associated costs, including costs to consolidate or close facilities and relocate employees. ##### [420-10-05-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:34.049Z to 2026-09-10T00:22:34.049Z Record version: sha256:ea748f1e0743d96a2daa73ede5a9404b7f15192581ed447ef58763f69002bc05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic addresses when to recognize a liability for a cost associated with an exit or disposal activity. An entity's commitment to an exit or disposal plan, by itself, does not create a present obligation to others that meets the definition of a liability. ##### [420-10-05-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:34.049Z to 2026-09-10T00:22:34.049Z Record version: sha256:ae562e2c03aed9746dac023f00dfa8b5cfbc03b674b6f091dcd9613dab0ea80e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Certain postemployment benefit costs that may be associated with exit or disposal activities are covered by other Topics. The accounting for employee termination benefits will differ depending on whether the benefits are provided under a one-time benefit arrangement covered by this Topic or an ongoing benefit arrangement referred to in the following list. As indicated in paragraph [420-10-15-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-6), this Topic does not change the accounting for termination benefits covered by the following Topics and Subtopics: 1. a Postemployment benefits provided through a pension or postretirement benefit plan (Subtopics 715-30 and 715-60 specify the accounting for those costs.) 2. b Other nonretirement postemployment benefits covered by Topic 712 3. c Special or contractual termination benefits covered by paragraphs [715-30-25-10](https://asc.understandingaccounting.org/asc/715/30/#715-30-25-10) and [715-60-25-4 through 25-6](https://asc.understandingaccounting.org/asc/715/60/#715-60-25-4) 4. d Individual deferred compensation arrangements that are addressed by paragraph [710-10-15-4(c)](https://asc.understandingaccounting.org/asc/710/10/#710-10-15-4) 5. e Stock compensation plans addressed by Topic 718. Source downloaded (UTC): 2026-09-10T00:22:35.798Z to 2026-09-10T00:22:35.798Z Record version: sha256:2f12617964a4d35083dd198effcf3e5a116be77180564ec082de191a29a1b1f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-10: 10 Objectives [Read section](https://asc.understandingaccounting.org/asc/420/10/#10-objectives) SEC content: no ##### [420-10-10-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-10-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:35.798Z to 2026-09-10T00:22:35.798Z Record version: sha256:5cec53772e82519500bf743d119e299968b017db3a5c81b21e380a1c4b91764c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The objective of the Exit or Disposal Cost Obligations Topic is to improve financial reporting by requiring that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:b57ec22c699dae19516546950073477db4d2aeaaf9998f4aee3487fdf7df46e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/420/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [420-10-15-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:ecc633a1ea614246571fbfef5505f5617ed0f2dd54c1a1c7e132c190e9a8726d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Scope Section of the Overall Subtopic establishes the pervasive scope for the Exit or Disposal Cost Obligations Topic. #### Entities ##### [420-10-15-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:2bfb417310eded0a396401116488082269a64dd80411ba932c2bf4b1129bb3af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Exit or Disposal Cost Obligations Topic applies to all entities. #### Transactions ##### [420-10-15-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:83833cf13ec855d09f7bf7e22ffb29e1072ee97669e6bece16016998ed83bfc1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Exit or Disposal Cost Obligations Topic applies to the following transactions and activities: 1. a Termination benefits provided to current employees that are involuntarily terminated under the terms of a benefit arrangement that, in substance, is not an ongoing benefit arrangement or an individual deferred compensation contract (referred to as [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement.")) 2. b Costs to terminate a contract that is not a [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.") (see paragraphs [420-10-25-11 through 25-13](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-11) for further description of contract termination costs and paragraph [842-20-40-1](https://asc.understandingaccounting.org/asc/842/20/#842-20-40-1) for terminations of a lease) 3. c Costs to consolidate facilities or relocate employees 4. d Costs associated with a disposal activity covered by Subtopic 205-20 5. e Costs associated with an exit activity, including exit activities associated with an entity newly acquired in a business combination or an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities."). ##### [420-10-15-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:140598af5b5792518de527cf6eb546f513113524b45b299ed51300262e087e0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An exit activity includes but is not limited to a [restructuring](https://asc.understandingaccounting.org/glossary/r/#restructuring "A program that is planned and controlled by management, and materially changes either the scope of a business undertaken by an entity, or the manner in which that business is conducted, as defined by the International Accounting Standard No. 37 in 2002."), such as the sale or termination of a line of business, the closure of business activities in a particular location, the relocation of business activities from one location to another, changes in management structure, and a fundamental reorganization that affects the nature and focus of operations. ##### [420-10-15-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:fdd4d90fa3ae5da8cf89e10dfd3f485affcd43ae83141a70ffa0216717894ebe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Topic does not apply to the following transactions and activities: 1. a Costs associated with the retirement of a long-lived asset covered by Subtopic 410-20. 2. b Impairment of an unrecognized asset while it is being used. #### Other Considerations ##### [420-10-15-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:70015cdff11b597f668a8c5324e1a7513db0d36c1b21db2b70243fe1f0d6742d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Certain postemployment benefits are covered by other Topics or Subtopics. This Topic does not change the accounting for termination benefits, including one-time termination benefits granted in the form of an enhancement to an ongoing benefit arrangement, covered by the following: 1. a Subtopic 715-30 2. b Subtopic 715-60 3. c Topic 712, which includes guidance on accounting for special or contractual termination benefits, payable before retirement and not payable from a pension or other postretirement plan, as indicated in paragraph [712-10-15-3](https://asc.understandingaccounting.org/asc/712/10/#712-10-15-3) 4. d Topic 710, which includes guidance on accounting for individual deferred compensation arrangements 5. e Topic 718, which addresses stock compensation plans. ##### [420-10-15-7](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:e005e2688e1f7b63f74de769a433ed99d8e84e41982ff2f8d68b74c3eaf79fa4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [420-10-55-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-1) and Example 5 (paragraph [420-10-55-16](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-16)) for guidance on determining whether an exit plan is a one-time termination benefit arrangement or an enhancement to an ongoing benefit arrangement as used in the preceding paragraph. ##### [420-10-15-8](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:37.535Z to 2026-09-10T00:22:37.535Z Record version: sha256:52d4067cb9732611ed5fe1fa95ac4ce2e2c48271e2a2ab81dbea25782fe81f6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a plan of termination that meets the criteria in paragraph [420-10-25-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-4) includes both involuntary termination benefits and voluntary termination benefits, then this Topic will apply to the involuntary termination benefits and paragraphs [712-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/712/10/#712-10-25-1) will apply to the incremental voluntary termination benefits (the excess of the voluntary termination benefit amount over the involuntary termination benefit amount). Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:d80c1afb9998819151d0b152fc777fdfa2abd4d839ca93260dd3ea2db94cd0ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/420/10/#25-recognition) SEC content: no #### Determining When to Recognize a Liability ##### [420-10-25-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:af007488c8577a4ff1882d92a7e081318c5712ecaa4b1b4280eca33cb2002b17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for a cost associated with an exit or disposal activity shall be recognized in the period in which the liability is incurred, except as indicated in paragraphs [420-10-25-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-6) and [420-10-25-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-9) (for a liability for [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement.") that is incurred over time). In the unusual circumstance in which fair value cannot be reasonably estimated, the liability shall be recognized initially in the period in which fair value can be reasonably estimated (see paragraphs [420-10-30-1 through 30-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-1) for fair value measurement guidance). ##### [420-10-25-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-2) Pending content: yes Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:cdf5da8b55850e34ed629d1ddb49c53b074057f4e075e2817daa30e9765a7f3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for a cost associated with an exit or disposal activity is incurred when the definition of a liability included in FASB Concepts Statement No. 6, Elements of Financial Statements, is met. Only present obligations to others are liabilities under the definition. An obligation becomes a present obligation when a transaction or event occurs that leaves an entity little or no discretion to avoid the future transfer or use of assets to settle the liability. An exit or disposal plan, by itself, does not create a present obligation to others for costs expected to be incurred under the plan; thus, an entity's commitment to an exit or disposal plan, by itself, is not the requisite past transaction or event for recognition of a liability. Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9) A liability for a cost associated with an exit or disposal activity is incurred when a transaction or event occurs that creates a present obligation of an entity to transfer an economic benefit. An exit or disposal plan, by itself, does not create a present obligation to others for costs expected to be incurred under the plan; thus, an entity's commitment to an exit or disposal plan, by itself, is not the requisite past transaction or event for recognition of a liability. ##### [420-10-25-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:d0f0d8769fe30bcf64784c7ac354300fd818b05d6bf3c19ac3319c024b3b09aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic requires that future operating losses expected to be incurred in connection with an exit or disposal activity be recognized in the period(s) in which they are incurred. Because future operating losses are the summation of individual items of revenue and expense that result from changes in assets and liabilities, those expected losses, in and of themselves, do not meet the definition of a liability. #### One-Time Employee Termination Benefits ##### [420-10-25-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:5f0a02fc051af51b1b28cb231f0c9ec89cf663dc043facd2e4267e2ba0456c4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An arrangement for [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement.") exists at the date the plan of termination meets all of the following criteria and has been communicated to employees (referred to as the [communication date](https://asc.understandingaccounting.org/glossary/c/#communication-date "The date the plan of termination for one-time employee termination benefits meets all of the criteria in paragraph 420-10-25-4 and has been communicated to employees.")): 1. a Management, having the authority to approve the action, commits to a plan of termination. 2. b The plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date. 3. c The plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination (including but not limited to cash payments), in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated. 4. d Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. ##### [420-10-25-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:1cd2c2acd7d7514eff5f26ca2965e681bdce4fe7cd249dd4fbfeda6a42ce4804 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's communication of a promise to provide one-time employee termination benefits is a promise that creates an obligation at the communication date to provide the termination benefits if employees are terminated. ##### [420-10-25-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:a5925cd3d8c0425080c9f28d928f68a40dbd78a3fa649cb25314e71dc6071035 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The timing of recognition for one-time employee termination benefits depends on whether employees are required to render service until they are terminated in order to receive the termination benefits and, if so, whether employees will be retained to render service beyond a minimum retention period. ##### [420-10-25-7](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:b8730236dbba35a7bb054602d3828d2f4a77c80539baa0557046b5e50d76b58d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The minimum retention period shall not exceed the [legal notification period](https://asc.understandingaccounting.org/glossary/l/#legal-notification-period "The notification period that an entity is required to provide to employees in advance of a specified termination event as a result of an existing law, statute, or contract."), or in the absence of a legal notification requirement, 60 days. For example, in the United States, the Worker Adjustment and Retraining Notification Act, as of 2002 required entities with 100 or more employees to notify employees 60 days in advance of covered plant closings and mass layoffs, unless otherwise specified. Collective bargaining or other labor contracts may require different notification periods. ##### [420-10-25-8](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:44a9c5c390cce9e07fba58fa3c7658a1c4a8c26d31fcc5bbd1954a50c22b5441 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If employees are not required to render service until they are terminated in order to receive the termination benefits (that is, if employees are entitled to receive the termination benefits regardless of when they leave) or if employees will not be retained to render service beyond the minimum retention period, a liability for the termination benefits shall be recognized at the communication date. For an illustration of this situation, see Example 1 (paragraph [420-10-55-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-2)). ##### [420-10-25-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:6810228f064924cc20ba8ffa054f02b163359d951bf77ca14c19aba4fe533790 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [420-10-30-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-6), if employees are required to render service until they are terminated in order to receive the termination benefits and will be retained to render service beyond the minimum retention period, a liability for the termination benefits shall be measured initially at the communication date based on the fair value of the liability as of the termination date, and shall be recognized ratably over the future service period. For an illustration of this situation, see Example 2 (paragraph [420-10-55-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-4)). ##### [420-10-25-10](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:87efd383d3dee8e9ca1b9763121b7286c6c0f620dcead018e120e2a9ea4a8f19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a plan of termination that meets the criteria in paragraph [420-10-25-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-4) includes both involuntary termination benefits and termination benefits offered for a short period of time in exchange for employees' voluntary termination of service, a liability for the involuntary termination benefits shall be recognized in accordance with this Subtopic. A liability for the incremental voluntary termination benefits (the excess of the voluntary termination benefit amount over the involuntary termination benefit amount) shall be recognized in accordance with paragraphs [712-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/712/10/#712-10-25-1) . For an illustration of this situation, see Example 3 (paragraph [420-10-55-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-9)). #### Contract Termination Costs ##### [420-10-25-11](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:0a16ae255174c77888d563ce9242c43de409133d5156284c30d8f9903938b765 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of this Subtopic, costs to terminate a contract (excluding [leases](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.") within the scope of Topic 842) are either of the following: 1. a  Costs to terminate the contract before the end of its term 2. b  Costs that will continue to be incurred under the contract for its remaining term without economic benefit to the entity. ##### [420-10-25-12](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:3d1e2cdf0d5e8d37046a70fc3484ef5578f3c56ccb161d4f5a49a09c4b5207dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for costs to terminate a contract before the end of its term shall be recognized when the entity terminates the contract in accordance with the contract terms (for example, when the entity gives written notice to the counterparty within the notification period specified by the contract or has otherwise negotiated a termination with the counterparty). ##### [420-10-25-13](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:182b8a33a77137317f7f2fe864936156c44d2a04f00342dcd8a391ab69784370 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity shall be recognized at the [cease-use date](https://asc.understandingaccounting.org/glossary/c/#cease-use-date "The date the entity ceases using the right conveyed by the contract, for example, to receive future goods or services."). #### Other Associated Costs ##### [420-10-25-14](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:1c7b8f13cd9df14d261daaa44e563d4c6e7707ee0ee3d084a7f3b461f869a9b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Other costs associated with an exit or disposal activity include, but are not limited to, costs to consolidate or close facilities and relocate employees. ##### [420-10-25-15](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:44.994Z to 2026-09-10T00:22:44.994Z Record version: sha256:d3a498b8a0c43566fc0e60fa352624711079d6c95a9a58e496c1aa2432b76e1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability shall not be recognized before it is incurred, even if the costs are incremental to other operating costs and will be incurred as a direct result of a plan. A liability for other costs associated with an exit or disposal activity shall be recognized in the period in which the liability is incurred (generally, when goods or services associated with the activity are received). Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:2a7862beee21d738821796e3f6f703dccb5d7260076fd8b00e781f81fc976234 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/420/10/#30-initial-measurement) SEC content: no #### Fair Value ##### [420-10-30-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:0d6c1abb33dd858951109bd5845add303501c26afca48d9c64382f0b4dc7c5bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for a cost associated with an exit or disposal activity shall be measured initially at its fair value in the period in which the liability is incurred, except as indicated in paragraphs [420-10-30-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-4) and [420-10-30-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-6) (for a liability for one-time termination benefits that is incurred over time). ##### [420-10-30-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:eb197d133e595eac34c2808023b74251a0367d71a95b4949d4c98edd4b557742 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quoted market prices are the best representation of fair value. However, for many of the liabilities covered by this Subtopic, quoted market prices will not be available. Consequently, in those circumstances, fair value will be estimated using some other valuation technique. A present value technique is often the best available valuation technique with which to estimate the fair value of a liability for a cost associated with an exit or disposal activity. For a liability that has uncertainties both in timing and amount, an expected present value technique generally will be the appropriate technique. ##### [420-10-30-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:32d480bb367e67ffddd1ca98bcc5abe6beec67a917207b04b6f46a0d1040cb63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some situations, a fair value measurement for a liability associated with an exit or disposal activity obtained using a valuation technique other than a present value technique may not be materially different from a fair value measurement obtained using a present value technique. In those situations, this Subtopic does not preclude the use of estimates and computational shortcuts that are consistent with a fair value measurement objective. #### One-Time Employee Termination Benefits ##### [420-10-30-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:34cc94720c4fcf5e47a8223619200752ceab20ebdff7a3f1757bf0e5ded0ea50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The timing of measurement of a liability for [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement.") depends on whether employees are required to render service until they are terminated in order to receive the termination benefits and, if so, whether employees will be retained to render service beyond a minimum retention period. ##### [420-10-30-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:83b2e6b824772869ff28473799d74b1e14e81bd519a5a05def66ebd31317907a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If employees are not required to render service until they are terminated in order to receive the termination benefits (that is, if employees are entitled to receive the termination benefits regardless of when they leave) or if employees will not be retained to render service beyond the minimum retention period, a liability for the termination benefits shall be measured at its fair value at the [communication date](https://asc.understandingaccounting.org/glossary/c/#communication-date "The date the plan of termination for one-time employee termination benefits meets all of the criteria in paragraph 420-10-25-4 and has been communicated to employees."). Example 1 (paragraph [420-10-55-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-2)) illustrates the application of this paragraph. ##### [420-10-30-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:0ba7773a52a3dad4cd9bb42e86bcffcb82e64a424d2cd48f1b8a7140e0e468c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If employees are required to render service until they are terminated in order to receive the termination benefits and will be retained to render service beyond the minimum retention period, a liability for the termination benefits shall be measured initially at the communication date based on the fair value of the liability as of the termination date. For an illustration of this situation, see Example 2 (paragraph [420-10-55-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-4)). #### Contract Termination Costs ##### [420-10-30-7](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:07d82c8b50aa5697fd918bd7b02549df09bc3de7d62e6d66e68a436c051c16ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for costs to terminate a contract before the end of its term shall be measured at its fair value when the entity terminates the contract in accordance with the contract terms (for example, when the entity gives written notice to the counterparty within the notification period specified by the contract or has otherwise negotiated a termination with the counterparty). ##### [420-10-30-8](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:3b6b5afbad5a3f13d7e50935e72069d220f6a6d069c3aa452e2e3cbb81852458 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/) ##### [420-10-30-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:26ae04dfc49a226bc201042888afeda32591d1fe98c43467d1b6296345fb3c1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity shall be measured at its fair value at the cease-use date. #### Other Associated Costs ##### [420-10-30-10](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:47.749Z to 2026-09-10T00:22:47.749Z Record version: sha256:6db243c4fba358637fcd9f6e295bd2447bfaee2eb8541eb00bde162c5efca047 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for other costs associated with an exit or disposal activity shall be measured at its fair value in the period in which the liability is incurred (generally, when goods or services associated with the activity are received). Source downloaded (UTC): 2026-09-10T00:22:51.194Z to 2026-09-10T00:22:51.194Z Record version: sha256:09a536952822babfcf5bf21d9d4f8d5ddd899a4c9c40bc5f8faeb9865c64a0e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/420/10/#35-subsequent-measurement) SEC content: no #### Changes in Estimates ##### [420-10-35-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:51.194Z to 2026-09-10T00:22:51.194Z Record version: sha256:1abf78aaf0bbf726a5ef73085619936f5968bdb566058a89421e3bd277a19101 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In periods subsequent to initial measurement, changes to the liability, including a change resulting from a revision to either the timing or the amount of estimated cash flows over the future service period, shall be measured using the credit-adjusted risk-free rate that was used to measure the liability initially. ##### [420-10-35-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:51.194Z to 2026-09-10T00:22:51.194Z Record version: sha256:13316c20be02a0a920c92f33cb0111d9d95959442d38937d1ca99102949778d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cumulative effect of a change resulting from a revision to either the timing or the amount of estimated cash flows shall be recognized as an adjustment to the liability in the period of the change. ##### [420-10-35-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:51.194Z to 2026-09-10T00:22:51.194Z Record version: sha256:c43566eeaa641757579df94071826b611dfb1c8e8f4a011a4d3e2ebe6b9adbc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a plan of termination changes and employees that were expected to be terminated within the minimum retention period are retained to render service beyond that period, a liability previously recognized at the [communication date](https://asc.understandingaccounting.org/glossary/c/#communication-date "The date the plan of termination for one-time employee termination benefits meets all of the criteria in paragraph 420-10-25-4 and has been communicated to employees.") shall be adjusted to the amount that would have been recognized if the provisions of paragraph [420-10-25-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-9) had been applied in all periods subsequent to the communication date. ##### [420-10-35-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:51.194Z to 2026-09-10T00:22:51.194Z Record version: sha256:fad5cbab3e8545ce9d004e7a56b990f550cb9b2591e4163b0dc9d3839bddba0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes due to the passage of time shall be recognized as an increase in the carrying amount of the liability and as an expense (for example, accretion expense). Accretion expense shall not be considered interest cost for purposes of applying Subtopic 835-20. Source downloaded (UTC): 2026-09-10T00:22:55.089Z to 2026-09-10T00:22:55.089Z Record version: sha256:19495d413cafdff34a82f15ca35e65910d3bfc0467a9ccdff1598908f3911832 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/420/10/#40-derecognition) SEC content: no #### Reversal of Liability ##### [420-10-40-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:55.089Z to 2026-09-10T00:22:55.089Z Record version: sha256:08a077b2a2df069e64320cf383bb39ca5c65295e4ebcb5ce29374895ba7352a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an event or circumstance occurs that discharges or removes an entity's responsibility to settle a liability for a cost associated with an exit or disposal activity recognized in a prior period, the liability shall be reversed. The related costs shall be reversed through the same line item(s) in the income statement (statement of activities) used when those costs were recognized initially. Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:a6ecac53a4548ba0abfeb036edf538456b5f7b5003faacf73721a41f8aaaf2df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/420/10/#45-other-presentation-matters) SEC content: no #### Changes in Estimates ##### [420-10-45-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:cd0c96f6c4081cfe78a4885e2b5ebd04b606b4f5fa91d9f1cf4079dd33a16aee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cumulative effect of a change resulting from a revision to either the timing or the amount of estimated cash flows shall be reported in the same line item(s) in the income statement (statement of activities) used when the related costs were recognized initially in the period of change. #### Exit or Disposal Activity Involving a Discontinued Operation ##### [420-10-45-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:39dfc4bbf9737b035374eafe2719f99be95dbe6832d7afee861456d87dc38eca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs associated with an exit or disposal activity involving a discontinued operation shall be included within the results of discontinued operations in accordance with Section 205-20-45. #### Income from Continuing Operations ##### [420-10-45-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:39c3a2a81f7b4886d009ee60c528ff1a76c8291f0ac255f0dcbc5ed08a4ecbf3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs associated with an exit or disposal activity that does not involve a discontinued operation shall be included in income from continuing operations before income taxes in the income statement of a business entity and in income from continuing operations in the statement of activities of a not-for-profit entity (NFP). Separate presentation of exit and disposal costs in the income statement is not prohibited. If a subtotal such as income from operations is presented, it shall include the amounts of those costs. ##### [420-10-45-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:851e8b3d12578e10ba2bd23ce3139be678f0e72aed45be28b4fa9a2fb34c6634 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [420-10-45-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:67144ee89eb22920a83446a5c357d055a8274e62ca1730830c44b82a0b2f11f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accretion expense shall not be considered interest cost for purposes of classification in the income statement (statement of activities). ##### [420-10-45-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:22:58.514Z to 2026-09-10T00:22:58.514Z Record version: sha256:26adf6b3381852da7f622afcec37058f50dd8c7fada64088ae9425ea8fd7eb5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [420-10-40-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-40-1) for the income statement presentation when the liability is reversed. Source downloaded (UTC): 2026-09-10T00:23:02.539Z to 2026-09-10T00:23:02.539Z Record version: sha256:65149ec11fb4db41baec82d8f2d3e2940d6ccb6474fd20b0b34e17b4691acd2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/420/10/#50-disclosure) SEC content: no ##### [420-10-50-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-50-1) Pending content: yes Source downloaded (UTC): 2026-09-10T00:23:02.539Z to 2026-09-10T00:23:02.539Z Record version: sha256:4962cf3def43a9133797c82d63410c1c603d86d535fac148fbd498e4170aeec3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All of the following information shall be disclosed in notes to financial statements that include the period in which an exit or disposal activity is initiated and any subsequent period until the activity is completed: 1. a A description of the exit or disposal activity, including the facts and circumstances leading to the expected activity and the expected completion date 2. b For each major type of cost associated with the activity (for example, [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement."), contract termination costs, and other associated costs), both of the following shall be disclosed: 1. 1 The total amount expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date 2. 2 A reconciliation of the beginning and ending liability balances showing separately the changes during the period attributable to costs incurred and charged to expense, costs paid or otherwise settled, and any adjustments to the liability with an explanation of the reason(s) why. 3. c The line item(s) in the income statement or the statement of activities in which the costs in (b) are aggregated 4. d For each reportable segment, as defined in Subtopic 280-10, the total amount of costs expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date, net of any adjustments to the liability with an explanation of the reason(s) why 5. e If a liability for a cost associated with the activity is not recognized because fair value cannot be reasonably estimated, that fact and the reasons why. 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)All of the following information shall be disclosed in notes to financial statements that include the period in which an exit or disposal activity is initiated and any subsequent period until the activity is completed: 1. a A description of the exit or disposal activity, including the facts and circumstances leading to the expected activity and the expected completion date 2. b For each major type of cost associated with the activity (for example, [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement."), contract termination costs, and other associated costs), both of the following shall be disclosed: 1. 1 The total amount expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date 2. 2 A reconciliation of the beginning and ending liability balances showing separately the changes during the period attributable to costs incurred and charged to expense, costs paid or otherwise settled, and any adjustments to the liability with an explanation of the reason(s) why. 3. c The line item(s) in the income statement or the statement of activities in which the costs in (b) are aggregated 4. d For each reportable segment, as defined in Subtopic 280-10, the total amount of costs expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date, net of any adjustments to the liability with an explanation of the reason(s) why 5. e If a liability for a cost associated with the activity is not recognized because fair value cannot be reasonably estimated, that fact and the reasons why. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)All of the following information shall be disclosed in notes to financial statements in annual and interim reporting periods that include the period in which an exit or disposal activity is initiated and any subsequent period until the activity is completed: 1. a A description of the exit or disposal activity, including the facts and circumstances leading to the expected activity and the expected completion date 2. b For each major type of cost associated with the activity (for example, [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement."), contract termination costs, and other associated costs), both of the following shall be disclosed: 1. 1 The total amount expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date 2. 2 A reconciliation of the beginning and ending liability balances showing separately the changes during the period attributable to costs incurred and charged to expense, costs paid or otherwise settled, and any adjustments to the liability with an explanation of the reason(s) why. 3. c The line item(s) in the income statement or the statement of activities in which the costs in (b) are aggregated 4. d For each reportable segment, as defined in Subtopic 280-10, the total amount of costs expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date, net of any adjustments to the liability with an explanation of the reason(s) why 5. e If a liability for a cost associated with the activity is not recognized because fair value cannot be reasonably estimated, that fact and the reasons why. 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): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:2c8586695b9c715d5f9adcc8d77c025e7e8e3ce54850b14d6bd64b773946336b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/420/10/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [420-10-55-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:88d71d1c891416f2dc9f72ec1e959df1b6cf3c30abaa70b11131567c4845970a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Additional termination benefits may be included within the scope of this Subtopic as follows.In order to be considered an enhancement to an ongoing benefit arrangement and, therefore, subject to the provisions of the Topics referred to in paragraphs [420-10-05-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-05-4) and [420-10-15-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-15-6), the additional termination benefits must represent a revision to the ongoing arrangement that is not limited to a specified termination event or a specified future period. Absent evidence to the contrary, an ongoing benefit arrangement is presumed to exist if an entity has a past practice of providing similar termination benefits. Otherwise, the additional termination benefits should be considered [one-time employee termination benefits](https://asc.understandingaccounting.org/glossary/o/#one-time-employee-termination-benefits "Benefits provided to current employees that are involuntarily terminated under the terms of a one-time benefit arrangement.") and accounted for under the provisions of this Topic. See Example 5 (paragraph [420-10-55-16](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-16)) for an illustration of such a determination. #### Illustrations ##### [420-10-55-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:759ddf950b5bf51722613d97799ff107aadf6ebc4483672f99f03638f2cd242c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example assumes that an entity has a one-time benefit arrangement established by a plan of termination that meets the criteria in paragraph [420-10-25-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-4) and has been communicated to employees. ##### [420-10-55-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:e94e0923bc12a0d84c448bc071efcd3a38065f0b8b3a319a1619fd8e30c38a83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity plans to cease operations in a particular location and determines that it no longer needs the 100 employees that currently work in that location. The entity notifies the employees that they will be terminated in 90 days. Each employee will receive as a termination benefit a cash payment of $6,000, which will be paid at the date an employee ceases rendering service during the 90-day period. In accordance with paragraph [420-10-25-8](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-8), a liability would be recognized at the [communication date](https://asc.understandingaccounting.org/glossary/c/#communication-date "The date the plan of termination for one-time employee termination benefits meets all of the criteria in paragraph 420-10-25-4 and has been communicated to employees.") and, in accordance with paragraph [420-10-30-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-5), measured at its fair value. In this case, because of the short discount period, $600,000 may not be materially different from the fair value of the liability at the communication date. ##### [420-10-55-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:330b615772de123caad2d7bbe1d1ecc1ca6a30fc8a01c82822a61a023f4a9576 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example assumes that an entity has a one-time benefit arrangement established by a plan of termination that meets the criteria in paragraph [420-10-25-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-4) and has been communicated to employees. ##### [420-10-55-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:4f285580f72b6055e4c5d9006b64a79e63d4d462df06de83128072ee0b47d49b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity plans to shut down a manufacturing facility in 16 months and, at that time, terminate all of the remaining employees at the facility. To induce employees to stay until the facility is shut down, the entity establishes a one-time stay bonus arrangement. Each employee that stays and renders service for the full 16-month period will receive as a termination benefit a cash payment of $10,000, which will be paid 6 months after the termination date. An employee that leaves voluntarily before the facility is shut down will not be entitled to receive any portion of the termination benefit. In accordance with paragraph [420-10-25-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-9), a liability for the termination benefits would be measured initially at the communication date and, in accordance with paragraph [420-10-30-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-6), based on the fair value of the liability as of the termination date and recognized ratably over the future service period. The fair value of the liability as of the termination date would be adjusted cumulatively for changes resulting from revisions to estimated cash flows over the future service period, measured using the credit-adjusted risk-free rate that was used to measure the liability initially (as illustrated in this Example). ##### [420-10-55-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:a693077e6213ae56a720da0c9f52c85ca3a1b53822385d73e5865649eb701e31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The fair value of the liability as of the termination date is $962,240, estimated at the communication date using an expected present value technique. The expected cash flows of $1 million (to be paid 6 months after the termination date), which consider the likelihood that some employees will leave voluntarily before the facility is shut down, are discounted for 6 months at the credit-adjusted risk-free rate of 8 percent. In this case, a risk premium is not considered in the present value measurement. Because the amounts of the cash flows will be fixed and certain as of the termination date, marketplace participants would not demand a risk premium. ##### [420-10-55-7](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:131dae97510e24eb18ff3224de86c0fe5c0446ebe91d9e2a558286dddd796220 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Therefore, a liability of $60,140 would be recognized in each month during the future service period (16 months). ##### [420-10-55-8](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:9d1c81629352e14ee1d0f0d907e70ba70640669d7f5a9e549de23ffcca4b454c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After eight months, more employees than originally estimated leave voluntarily. The entity adjusts the fair value of the liability as of the termination date to $769,792 to reflect the revised expected cash flows of $800,000 (to be paid 6 months after the termination date), discounted for 6 months at the credit-adjusted risk-free rate that was used to measure the liability initially (8 percent). Based on that revised estimate, a liability (expense) of $48,112 would have been recognized in each month during the future service period. Thus, the liability recognized to date of $481,120 ($60,140 × 8) would be reduced to $384,896 ($48,112 × 8) to reflect the cumulative effect of that change (of $96,224). A liability of $48,112 would be recognized in each month during the remaining future service period (8 months). Accretion expense would be recognized after the termination date in accordance with the guidance beginning in paragraph [420-10-35-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-35-1) and in paragraph [420-10-45-5](https://asc.understandingaccounting.org/asc/420/10/#420-10-45-5). ##### [420-10-55-9](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:9c4336015aacb34bd4c6057a72a4b7cd89e4251783d2e063760d84b368bb8ee6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example assumes that an entity has a one-time benefit arrangement established by a plan of termination that meets the criteria of paragraph [420-10-25-4](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-4) and has been communicated to employees. ##### [420-10-55-10](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:da24adadc546fcfda213882cd44affcba081aa256d748fac4061a6a09c62b6ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity initiates changes to streamline operations in a particular location and determines that, as a result, it no longer needs 100 of the employees that currently work in that location. The plan of termination provides for both voluntary and involuntary termination benefits (in the form of cash payments). Specifically, the entity offers each employee (up to 100 employees) that voluntarily terminates within 30 days a voluntary termination benefit of $10,000 to be paid at the separation date. Each employee that is involuntarily terminated thereafter (to reach the target of 100) will receive an involuntary termination benefit of $6,000 to be paid at the termination date. The entity expects all 100 employees to leave (voluntarily or involuntarily) within the minimum retention period. In accordance with paragraphs [420-10-25-6 through 25-8](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-6) , a liability for the involuntary termination benefit (of $6,000 per employee) would be recognized at the communication date and, in accordance with paragraphs [420-10-30-4 through 30-6](https://asc.understandingaccounting.org/asc/420/10/#420-10-30-4) , measured at its fair value. In this case, because of the short discount period, $600,000 may not be materially different from the fair value of the liability at the communication date. As noted in paragraph [420-10-25-10](https://asc.understandingaccounting.org/asc/420/10/#420-10-25-10), a liability for the incremental voluntary termination benefit (of $4,000 per employee) would be recognized in accordance with paragraph [712-10-25-1 through 25-3](https://asc.understandingaccounting.org/asc/712/10/#712-10-25-1) (that is, when employees accept the offer). ##### [420-10-55-11](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:0a2280ba36e3cdaf4cf3b17e6e0bfabfbaf6f44d134b51722ca0720823f85c13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/). ##### [420-10-55-12](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:8daa4b3b9da1ef20c1676c95f5439db37c5970dadc4d3a48e4aafa6905c3aead Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/). ##### [420-10-55-13](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:4fd83ca4667737136e8e3b09a8c31e8c1853b1630dd33e974a54fdbe3194ccef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/). ##### [420-10-55-14](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:c4bacfbf08d2d841e9167dfdb5fe2904948310e6561322200edfafd10dbdbc67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/). ##### [420-10-55-15](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:9f8651102665abc20a5fc90d3dcf78db25fdbf8227545d7c8efe6e5adb82f669 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/). ##### [420-10-55-16](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:6338eeac286d9561b1c0ff61914df816492427f339e538b0c624bb8323868e81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example is in the context of a typical involuntary termination benefit plan subject to the provisions of Topic 712. ##### [420-10-55-17](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:dff0a89fb3461932fa6753d3d5feb72649b9b216c1492f81f3c1383168aefe92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity has a written involuntary termination benefit plan that is distributed to all of its employees at date of hire. The plan provides that upon an involuntary termination of employment for other than cause, each terminated employee will receive one week of severance pay for every year of service. In the current year, the entity initiates a reduction in force. In connection with that reduction in force, management decides to amend the ongoing benefit arrangement to provide an additional two weeks of severance pay for every year of service. That additional benefit applies to all employees affected by this reduction in force and all future involuntary terminations. ##### [420-10-55-18](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:e3b2dbb8a2df2ba8001954b8b7cd85f16af31f456d877c8a84b54a37a16f4d25 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the circumstances, the additional termination benefit is considered an enhancement to the ongoing termination benefit plan because it represents a revision to the ongoing plan that applies to all future involuntary terminations. That is, the amendment to the ongoing benefit arrangement is not limited to a specified termination event or specified future period. Therefore, the additional termination benefit should be accounted for in accordance with Topic 712, which requires that a liability for certain termination benefits provided under an ongoing benefit arrangement be recognized when the likelihood of future settlement is probable, as that term is used in Topic 450. Thus, termination benefits that, based on the benefit formula, are attributable to past service may be recognized initially at a plan date if at that date it becomes probable that employees will be terminated and receive termination benefits under the benefit arrangement (the benefit arrangement having been communicated to employees previously, for example, at the date of hire). ##### [420-10-55-19](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:04.395Z to 2026-09-10T00:23:04.395Z Record version: sha256:5c62c9a49e17daa929211782474655b4be1b819666048c5e9ef745c86b52231e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If this Example were changed to indicate that the additional termination benefits only applied to the employees affected by that reduction in force and similar benefits had not been provided for a past reduction in force, those additional benefits would not be considered an enhancement to the ongoing termination benefit plan and would, therefore, be accounted for under the guidance in this Subtopic. See paragraph [420-10-55-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-55-1) for additional information regarding making this determination. Source downloaded (UTC): 2026-09-10T00:23:07.719Z to 2026-09-10T00:23:07.719Z Record version: sha256:69002f398bff8d26305ef1133552663abc14c2df5a3072e2d9c0b2c0ef64cb8d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/420/10/#60-relationships) SEC content: no #### Compensation—Retirement Benefits ##### [420-10-60-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:07.719Z to 2026-09-10T00:23:07.719Z Record version: sha256:9ece2c4644f128fe730a190137a8ff968725ddc4fa85ce4f60535e352fdfd54b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance related to settlement of all or a part of an employer's accumulated postretirement benefit obligation or curtailment of a postretirement benefit plan and to an employer that provides postretirement benefits as part of a special termination benefits offer, see Topic 715. ##### [420-10-60-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-60-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:07.719Z to 2026-09-10T00:23:07.719Z Record version: sha256:55d657e1252bb9df45ab4375a11d1c4c3ea540b62d7941bd442a5a4430167de0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance when voluntary or involuntary severance of employment arrangements offered outside the United States are in substance a pension plan (for example, if the benefits are paid for virtually all terminations), see paragraph [715-30-25-10](https://asc.understandingaccounting.org/asc/715/30/#715-30-25-10) and Topic 715, respectively. #### Business Combinations ##### [420-10-60-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-60-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:07.719Z to 2026-09-10T00:23:07.719Z Record version: sha256:8023a7507bf5f98ace0bdc5868bab62d86ec828c7a162357a03c2a9949506628 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance when termination benefits are triggered by the consummation of a business combination, see paragraphs [805-20-55-50 through 55-51](https://asc.understandingaccounting.org/asc/805/20/#805-20-55-50) . Source downloaded (UTC): 2026-09-10T00:23:14.250Z to 2026-09-10T00:23:14.250Z Record version: sha256:e4c0349086797940c0e230ec20a10d111bd80fbc68c77f6699eac0547e31ae69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/420/10/#sec-00-status) SEC content: yes ##### [420-10-S00-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:14.250Z to 2026-09-10T00:23:14.250Z Record version: sha256:4521f7be341ac4d55f05a34bf45172989af35ceda4b54f1beca28a6201a9024b 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
420-10-S99-1AmendedAccounting Standards Update No. 2012-0308/27/2012
420-10-S99-2AmendedAccounting Standards Update No. 2012-0308/27/2012
Source downloaded (UTC): 2026-09-10T00:23:16.706Z to 2026-09-10T00:23:16.706Z Record version: sha256:9cc6eaf96806bd31da7e67c0fe9613ddb28f827df42ba63ae20f69261d646d63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-S45: SEC 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/420/10/#sec-45-other-presentation-matters) SEC content: yes #### Income Statement Presentation of Restructuring Charges ##### [420-10-S45-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-S45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:16.706Z to 2026-09-10T00:23:16.706Z Record version: sha256:19b8fb2a5d04ddfe0f4483794a608d473d995894f2b18be61e91169685bb81e6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [420-10-S99-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-S99-1), SAB Topic 5.P.3, for SEC Staff views on income statement presentation of restructuring charges. #### Inventory Markdowns Associated with a Restructuring ##### [420-10-S45-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-S45-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:16.706Z to 2026-09-10T00:23:16.706Z Record version: sha256:6388978d02a2a2a1ffb8d9aa9e46d8626961fbc8e2d7e3c6ecff17f20fdfb87e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [420-10-S99-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-S99-3), SEC Observer Comment: Classification of Inventory Markdowns and Other Costs Associated with Restructuring, for SEC Staff views on the classification of inventory markdowns associated with restructuring activities. Source downloaded (UTC): 2026-09-10T00:23:19.534Z to 2026-09-10T00:23:19.534Z Record version: sha256:69a63b9982c95db51ee3e2bd82a5dd92ed7a5a652800e6cc3fda45e3df2f2c34 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/420/10/#sec-50-disclosure) SEC content: yes #### Disclosures Related to Restructuring Charges ##### [420-10-S50-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-S50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:19.534Z to 2026-09-10T00:23:19.534Z Record version: sha256:c0d84e3959ba0f5ab6c2b7a6ac1b74a88382bec5089d198f736e1b88fdac8e62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [420-10-S99-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-S99-2), SAB Topic 5.P.4, for SEC Staff views on disclosures pertaining to restructuring charges. Source downloaded (UTC): 2026-09-10T00:23:24.442Z to 2026-09-10T00:23:24.442Z Record version: sha256:d8392a62d86f7db7177ad071d941ec00ba644fb0ec9e8c85b955316893262b95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 420-10-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/420/10/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [420-10-S99-1](https://asc.understandingaccounting.org/asc/420/10/#420-10-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:24.442Z to 2026-09-10T00:23:24.442Z Record version: sha256:9d681d752f080cdb114b1928d0605d0fd53ae282245800f884cd9212192404dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.P.3, Income Statement Presentation of Restructuring Charges. - Facts: Restructuring charges often do not relate to a separate component of the entity, and, as such, they would not qualify for presentation as losses on the disposal of a discontinued operation. Additionally, since the charges are not both unusual and infrequent FN15 they are not presented in the income statement as extraordinary items. - FN15 See FASB ASC paragraph [225-20-45-2](https://asc.understandingaccounting.org/asc/225/20/#225-20-45-2). - Question 1: May such restructuring charges be presented in the income statement as a separate caption after income from continuing operations before income taxes (i. e., preceding income taxes and/or discontinued operations)? - Interpretive Response: No. FASB ASC paragraph [220-20-45-1](https://asc.understandingaccounting.org/asc/220/20/#220-20-45-1) (Income Statement—Reporting Comprehensive Income Topic) states that items that do not meet the criteria for classification as an extraordinary item should be reported as a component of income from continuing operations. FN16 Neither FASB ASC Subtopic 225-20, Income Statement—Extraordinary and Unusual Items, nor Rule 5-03 of Regulation S-X contemplate a category in between continuing and discontinued operations. Accordingly, the staff believes that restructuring charges should be presented as a component of income from continuing operations, separately disclosed if material. Furthermore, the staff believes that a separately presented restructuring charge should not be preceded by a sub-total representing "income from continuing operations before restructuring charge" (whether or not it is so captioned). Such a presentation would be inconsistent with the intent of FASB ASC Subtopic 225-20. - FN16 FASB ASC paragraph [220-20-45-1](https://asc.understandingaccounting.org/asc/220/20/#220-20-45-1) further provides that such items should not be reported on the income statement net of income taxes or in any manner that implies that they are similar to extraordinary items. - Question 2: Some registrants utilize a classified or "two-step" income statement format (i. e., one which presents operating revenues, expenses and income followed by other income and expense items). May a charge which relates to assets or activities for which the associated revenues and expenses have historically been included in operating income be presented as an item of "other expense" in such an income statement? - Interpretive Response: No. The staff believes that the proper classification of a restructuring charge depends on the nature of the charge and the assets and operations to which it relates. Therefore, charges which relate to activities for which the revenues and expenses have historically been included in operating income should generally be classified as an operating expense, separately disclosed if material. Furthermore, when a restructuring charge is classified as an operating expense, the staff believes that it is generally inappropriate to present a preceding subtotal captioned or representing operating income before restructuring charges. Such an amount does not represent a measurement of operating results under GAAP. - Conversely, charges relating to activities previously included under "other income and expenses" should be similarly classified, also separately disclosed if material. ##### [420-10-S99-2](https://asc.understandingaccounting.org/asc/420/10/#420-10-S99-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:24.442Z to 2026-09-10T00:23:24.442Z Record version: sha256:0a217c4547c4ecddf62c0262fc3337026d248fd3257280bf7fc108a1ef7e2b0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.P.4, Disclosures. - Beginning with the period in which the exit plan is initiated, FASB ASC Topic 420, Exit or Disposal Cost Obligations, requires disclosure, in all periods, including interim periods, until the exit plan is completed, of the following: - a. A description of the exit or disposal activity, including the facts and circumstances leading to the expected activity and the expected completion date. - b. For each major type of cost associated with the activity (for example, one-time termination benefits, contract termination costs, and other associated costs): - (1) The total amount expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date. - (2) A reconciliation of the beginning and ending liability balances showing separately the changes during the period attributable to costs incurred and charged to expense, costs paid or otherwise settled, and any adjustments to the liability with an explanation of the reason(s) therefor. - c. The line item(s) in the income statement or the statement of activities in which the costs in (b) above are aggregated. - d. For each reportable segment, the total amount of costs expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date, net of any adjustments to the liability with an explanation of the reason(s) therefor. - e. If a liability for a cost associated with the activity is not recognized because fair value cannot be reasonably estimated, that fact and the reasons therefor. - Question: What specific disclosures about restructuring charges has the staff requested to fulfill the disclosure requirements of FASB ASC Topic 420 and MD&A? - Interpretive Response: The staff often has requested greater disaggregation and more precise labeling when exit and involuntary termination costs are grouped in a note or income statement line item with items unrelated to the exit plan. For the reader's understanding, the staff has requested that discretionary, or decision-dependent, costs of a period, such as exit costs, be disclosed and explained in MD&A separately. Also to improve transparency, the staff has requested disclosure of the nature and amounts of additional types of exit costs and other types of restructuring charges FN17 that appear quantitatively or qualitatively material, and requested that losses relating to asset impairments be identified separately from charges based on estimates of future cash expenditures. - FN17 Examples of common components of exit costs and other types of restructuring charges which should be considered for separate disclosure include, but are not limited to, involuntary employee terminations and related costs, changes in valuation of current assets such as inventory writedowns, long term asset disposals, adjustments for warranties and product returns, leasehold termination payments, and other facility exit costs, among others. - The staff frequently reminds registrants that in periods subsequent to the initiation date that material changes and activity in the liability balances of each significant type of exit cost and involuntary employee termination benefits FN18 (either as a result of expenditures or changes in/reversals of estimates or the fair value of the liability) should be disclosed in the footnotes to the interim and annual financial statements and discussed in MD&A. In the event a company recognized liabilities for exit costs and involuntary employee termination benefits relating to multiple exit plans, the staff believes presentation of separate information for each individual exit plan that has a material effect on the balance sheet, results of operations or cash flows generally is appropriate. - FN18 The staff would expect similar disclosures for employee termination benefits whether those costs have been recognized pursuant to FASB ASC Topic 420, FASB ASC Topic 712, Compensation—Nonretirement Postemployment Benefits, or FASB ASC Topic 715, Compensation—Retirement Benefits. - For material exit or involuntary employee termination costs related to an acquired business, the staff has requested disclosure in either MD&A or the financial statements of: - 1\. When the registrant began formulating exit plans for which accrual may be necessary, - 2\. The types and amounts of liabilities recognized for exit costs and involuntary employee termination benefits and included in the acquisition cost allocation, and. - 3\. Any unresolved contingencies or purchase price allocation issues and the types of additional liabilities that may result in an adjustment of the acquisition cost allocation. - The staff has noted that the economic or other events that cause a registrant to consider and/or adopt an exit plan or that impair the carrying amount of assets, generally occur over time. Accordingly, the staff believes that as those events and the resulting trends and uncertainties evolve, they often will meet the requirement for disclosure pursuant to the Commission's MD&A rules prior to the period in which the exit costs and liabilities are recorded pursuant to GAAP. Whether or not currently recognizable in the financial statements, material exit or involuntary termination costs that affect a known trend, demand, commitment, event, or uncertainty to management, should be disclosed in MD&A. The staff believes that MD&A should include discussion of the events and decisions which gave rise to the exit costs and exit plan, and the likely effects of management's plans on financial position, future operating results and liquidity unless it is determined that a material effect is not reasonably likely to occur. Registrants should identify the periods in which material cash outlays are anticipated and the expected source of their funding. Registrants should also discuss material revisions to exit plans, exit costs, or the timing of the plan's execution, including the nature and reasons for the revisions. - The staff believes that the expected effects on future earnings and cash flows resulting from the exit plan (for example, reduced depreciation, reduced employee expense, etc.) should be quantified and disclosed, along with the initial period in which those effects are expected to be realized. This includes whether the cost savings are expected to be offset by anticipated increases in other expenses or reduced revenues. This discussion should clearly identify the income statement line items to be impacted (for example, cost of sales; marketing; selling, general and administrative expenses; etc.). In later periods if actual savings anticipated by the exit plan are not achieved as expected or are achieved in periods other than as expected, MD&A should discuss that outcome, its reasons, and its likely effects on future operating results and liquidity. - The staff often finds that, because of the discretionary nature of exit plans and the components thereof, presenting and analyzing material exit and involuntary termination charges in tabular form, with the related liability balances and activity (e. g., beginning balance, new charges, cash payments, other adjustments with explanations, and ending balances) from balance sheet date to balance sheet date, is necessary to explain fully the components and effects of significant restructuring charges. The staff believes that such a tabular analysis aids a financial statement user's ability to disaggregate the restructuring charge by income statement line item in which the costs would have otherwise been recognized, absent the restructuring plan, (for example, cost of sales; selling, general, and administrative; etc.). ##### [420-10-S99-3](https://asc.understandingaccounting.org/asc/420/10/#420-10-S99-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:23:24.442Z to 2026-09-10T00:23:24.442Z Record version: sha256:bde898a74312a25bd68a53466d7c6b182a9b307e2713905bf3b1ef03eb2640c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Observer Comment: Classification of Inventory Markdowns and Other Costs Associated with Restructuring. - Subtopic 420-10 states that costs associated with exit or disposal activities that do not involve a discontinued operation should be included in income from continuing operations before taxes. If a subtotal such as "income from operations" is presented, that Subtopic indicates that subtotal should include the amounts of exit or disposal costs. However, the guidance does not address where within income from continuing operations or income from operations inventory markdowns associated with an exit or restructuring activity. The SEC staff recognizes that there may be circumstances in which it can be asserted that inventory markdowns are costs directly attributable to a decision to exit or restructure an activity. However, the staff believes that it is difficult to distinguish inventory markdowns attributable to a decision to exit or restructure an activity from inventory markdowns attributable to external market factors that are independent of a decision to exit or restructure an activity. Further, the staff believes that decisions about the timing, method, and pricing of dispositions of inventory generally are considered to be normal, recurring activities integral to the management of the ongoing business. Accordingly, the SEC staff believes that inventory markdowns should be classified in the income statement as a component of cost of goods sold.