# ASC 440-954-55: Commitments — Health Care Entities — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/440/954/#55-implementation-guidance-and-illustrations) 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): 2026-09-10T00:26:42.942Z to 2026-09-10T00:26:42.942Z Record version: sha256:0fe3587c0c304d6cd1fd940b29ef134827c87be4dba1147dfce629899ffb07e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 440-954-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/440/954/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [440-954-55-1](https://asc.understandingaccounting.org/asc/440/954/#440-954-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:26:42.942Z to 2026-09-10T00:26:42.942Z Record version: sha256:df940942e703dfd2b063cde29b9593531fb6ca80e31062856afbe14f6c39213d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in Sections 954-440-25 and 954-440-35. This Example has the following assumptions: 1. a All residents pay a $ 50,000 fee, which is refundable less 2 percent per month for the first 36 months. After that period, none of the fee is refundable. The continuing care retirement community opened on 1/1/X4. 2. b An additional periodic fee of $1,000 is payable monthly with a 5 percent increase annually. 3. c The asset recognized for the incremental cost of obtaining the contract on 12/31/X6 is assumed to be $17,000. 4. d The deferred revenue ([contract liability](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.")) on 12/31/X6 is assumed to be $27,027. ##### [440-954-55-2](https://asc.understandingaccounting.org/asc/440/954/#440-954-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:26:42.942Z to 2026-09-10T00:26:42.942Z Record version: sha256:203fd9217ee45386d358e43cf417c6cb5b842673db02d12d2bccbf09a4955c74 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following tables illustrate the present value of net cash flow on 12/31/X6. - ![](https://asc.understandingaccounting.org/asc-img/GUID-0742E35A-7E88-410D-8880-066FF26A944B-low.gif) "Estimated Remaining Life (in Months) on 12/31/X6" Estimated Cash Inflows Resident 19X7 19X8 19X9 20X0 A 36 " $12,000 " " $12,600 " " $13,230 " - B 22 " 12,000 " " 10,500 " - - C 27 " 12,000 " " 12,600 " " 3,308 " - D 38 " 12,000 " " 12,600 " " 13,230 " " $2,315 " Estimated cash inflows " $48,000 " " $48,300 " " $29,768 " " $2,315 " - ![](https://asc.understandingaccounting.org/asc-img/GUID-40489FB1-7CD4-409D-A45B-A9A04421F508-low.gif) "Estimated Remaining Life (in Months) on 12/31/X6" Estimated Cash Outflows Resident 19X7 19X8 19X9 20X0 A 36 " $10,000 " " $12,000 " " $15,000 " - B 22 " 15,000 " " 11,000 " - - C 27 " 14,000 " " 17,000 " " 5,000 " - D 38 " 8,000 " " 12,000 " " 14,000 " " $4,000 " Estimated cash outflows " $47,000 " " $52,000 " " $34,000 " " $4,000 " Recapitulation 19X7 19X8 19X9 20X0 Cash inflows " $48,000 " " $48,300 " " $29,768 " " $2,315 " Cash outflows " (47,000)" " (52,000)" " (34,000)" " (4,000)" " $1,000 " " $(3,700)" " $(4,232)" " $(1,685)" Present value of net cash flows discounted at 10 percent " $(7,137)" ##### [440-954-55-3](https://asc.understandingaccounting.org/asc/440/954/#440-954-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:26:42.942Z to 2026-09-10T00:26:42.942Z Record version: sha256:33ec1aebd69290d6d8fad54d25df9af77c45587bd635ab19bc87ba1fa60880af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following tables illustrate the depreciation of facilities to be charged to current residents. - ![](https://asc.understandingaccounting.org/asc-img/GUID-B8BB8644-E80F-4411-9C3E-CC685A0AB4B1-low.gif) Original cost of facility " $17,000,000 " Cost of facility allocable to revenue-producing service areas " $(2,000,000)" Cost of facility to be allocated to residents (including common areas) " $15,000,000 " Useful life 40 years Annual depreciation using straight-line method " $375,000 " Number of residents expected to occupy the facility 200 Annual depreciation per resident " $1,875 " Monthly depreciation per resident $156 - ![](https://asc.understandingaccounting.org/asc-img/GUID-F14F3925-61FA-4719-A91F-1640E99F3D55-low.gif) Resident "Estimated Remaining Life (in Months) on 12/31/X6" 19X7 19X8 19X9 20X0 A 36 " $1,875 " " $1,875 " " $1,875 " - B 22 " 1,875 " " 1,560 " - - C 27 " 1,875 " " 1,875 " 468 - D 38 " 1,875 " " 1,875 " " 1,875 " $312 Yearly estimated depreciation of facilities to be charged to current residents " $7,500 " " $7,185 " " $4,218 " $312 Total estimated depreciation of the use of facilities to be charged to the current residents " $19,215 " ##### [440-954-55-4](https://asc.understandingaccounting.org/asc/440/954/#440-954-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:26:42.942Z to 2026-09-10T00:26:42.942Z Record version: sha256:fe9331004334769ffda1c8704ebaf31780b2419cd2de28d19bddfa6269773c0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates the liability for providing future services and the use of facilities to current residents. - ![](https://asc.understandingaccounting.org/asc-img/GUID-11365D79-EF72-4119-A43B-6EA0A5C9CEA4-low.gif) Present value of future net cash outflows " $7,137 " Minus: Deferred revenue (contract liability) on 12/31/X6 " $(27,027)" Plus: Depreciation to be charged to current residents " $19,215 " Asset recognized for the incremental cost of obtaining the contract—see paragraph 954-440-55-1(c) " $17,000 " (a) Liability for providing future services and the use of facilities to current residents on 12/31/X6 " $16,325 " (a) "These numbers are for illustrative purposes only and no inference has been made as to the recoverability of the $17,000."