Commitments

ASC 440 is primarily a disclosure Topic: it tells entities what contractual commitments must be described in the notes even when nothing is recorded on the balance sheet. The general Subtopic, 440-10, requires disclosure of items such as unused letters of credit, pledged assets, cumulative preferred dividends in arrears, plant acquisition and debt-reduction/working-capital/dividend-restriction commitments (440-10-50-1), plus off-balance-sheet unconditional purchase obligations (take-or-pay and throughput contracts) that are noncancelable, were negotiated to help finance the supplier's facility, and run more than a year (440-10-50-2 through 50-6); recognition itself is left to Topics 842, 815, and 330 (440-10-25-2 through 25-4). Industry Subtopics add narrow disclosure rules — music artist advances and royalty guarantees (440-928-50-1) and executed but unrecognized broadcast license agreements (440-920-50-1) — while 440-952 (franchisors) is entirely superseded. The one Subtopic with real measurement content is 440-954, which requires a CCRC to remeasure annually and accrue a liability for the obligation to provide future services and use of facilities when fees are insufficient, measured at the present value of future net cash flows less deferred revenue plus facility depreciation and unamortized costs of obtaining a contract (440-954-35-2 through 35-3).

Subtopics

1. 10Overall45 ¶

   ASC 440-10 is the general "Commitments" subtopic: it requires disclosure of certain contractual commitments (unused letters of credit, pledged assets, cumulative preferred dividends in arrears, plant acquisition commitments, obligations to reduce debt, maintain working capital, or restrict dividends) that are not otherwise more explicitly addressed elsewhere in the Codification. Its Unconditional Purchase Obligations Subsections require disclosure of off-balance-sheet take-or-pay and throughput contracts that are noncancelable, were negotiated as part of arranging financing for the supplier's facility, and have a remaining term over one year. The Topic is largely a disclosure standard—recognition of such obligations is governed by other Topics (842, 815, 330).

   00051525505560
2. 920Entertainment—Broadcasters3 ¶

   This Subtopic governs disclosure by broadcasters of program license agreements that have been signed (executed) but that do not yet qualify for recognition as an asset and liability on the balance sheet. The single rule is that such executory license commitments must be disclosed in the notes, even though they are not recorded, because the recognition conditions in 920-350-25-2 have not been met.

   051550
3. 928Entertainment—Music3 ¶

   This Subtopic sets the disclosure requirement for commitments in the music industry. An entity must disclose commitments to pay artist advances in future years and any guarantees obligating it to pay royalties in the future (440-928-50-1). It contains no recognition or measurement guidance—only disclosure.

   051550
4. 952Franchisors4 ¶

   ASC 440-952 was the franchisor-specific extension of the Commitments topic, but every substantive paragraph (05-1 overview, 15-1 scope, and 50-1 disclosure) was superseded by Maintenance Update 2017-09. The subtopic therefore contains no remaining guidance; franchisor commitment and disclosure requirements now fall under the general Commitments guidance in ASC 440-10 and, for franchise revenue, ASC 606.

   00051550
5. 954Health Care Entities25 ¶

   This subtopic governs the commitment of a continuing care retirement community (CCRC) to provide future services and the use of facilities to current residents under continuing-care contracts. The CCRC must recalculate that obligation annually and, if advance fees plus periodic fees are insufficient to cover the cost of future services and facilities, record a liability measured actuarially at the present value of future net cash flows, less deferred revenue (contract liability), plus depreciation of facilities to be charged to those contracts and any unamortized incremental costs of obtaining a contract. Extensive note disclosure about the contracts, liability, discount rate, escrow requirements, and refund policy is required.

   0005152535505560