{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/470/40/#15-scope-and-scope-exceptions","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"470","topic_title":"Debt","subtopic":"470-40","subtopic_title":"Product Financing Arrangements","section":{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Entities","paragraphs":[{"citation":"470-40-15-1","para":"15-1","html":"
The guidance in this Subtopic applies to all entities.
","snippet":"The guidance in this Subtopic applies to all entities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42dc5d2d130299dcff511a796d16839eaa2156e7ba2edd7a8275245bbd4bcab3","downloaded_from":"2026-09-10T00:32:34.310Z","last_downloaded_at":"2026-09-10T00:32:34.310Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481537","source_sha256":"12c1bf6070f3b27afac5e6132a60f12fe460ae793c38ba5c9cf448fe56d64f60"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72679b291f05e68c11901b89daf6705ee21309ba9d2fee68c873840dd9dc4aba","downloaded_from":"2026-09-10T00:32:34.310Z","last_downloaded_at":"2026-09-10T00:32:34.310Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481537","source_sha256":"12c1bf6070f3b27afac5e6132a60f12fe460ae793c38ba5c9cf448fe56d64f60"}},{"block":null,"heading":"Transactions","paragraphs":[{"citation":"470-40-15-2","para":"15-2","html":"
The guidance in this Subtopic applies to product financing arrangements for products that have been purchased by another entity on behalf of the sponsor and have both of the following characteristics:
  1. a
    The financing arrangement requires the sponsor to purchase the product, a substantially identical product, or processed goods of which the product is a component at specified prices. The specified prices are not subject to change except for fluctuations due to finance and holding costs. This characteristic of predetermined prices also is present if any of the following circumstances exist:
    1. 1
      The specified prices in the financing arrangement are in the form of resale price guarantees under which the sponsor agrees to make up any difference between the specified price and the resale price for products sold to third parties.
    2. 2
      The sponsor is not required to purchase the product but has an option to purchase the product, the economic effect of which compels the sponsor to purchase the product; for example, an option arrangement that provides for a significant penalty if the sponsor does not exercise the option to purchase.
    3. 3
      The sponsor is not required by the agreement to purchase the product but the other entity has an option whereby it can require the sponsor to purchase the product.
  2. b
    The payments that the other entity will receive on the transaction are established by the financing arrangement, and the amounts to be paid by the sponsor will be adjusted, as necessary, to cover substantially all fluctuations in costs incurred by the other entity in purchasing and holding the product (including interest). This characteristic ordinarily is not present in purchase commitments or contractor-subcontractor relationships.
","snippet":"The guidance in this Subtopic applies to product financing arrangements for products that have been purchased by another entity on behalf of the sponsor and have both of the following characteristics:\n(a) The financing a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ffa4d5f034f683c9937c87456a99e987a2324e0c628df71294bef802e713a6e9","downloaded_from":"2026-09-10T00:32:34.310Z","last_downloaded_at":"2026-09-10T00:32:34.310Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481537","source_sha256":"12c1bf6070f3b27afac5e6132a60f12fe460ae793c38ba5c9cf448fe56d64f60"}},{"citation":"470-40-15-3","para":"15-3","html":"
The guidance in this Subtopic does not apply to the following transactions and activities:
  1. a
    Ordinary purchase commitments in which control of the good or service is retained by the seller (for example, a manufacturer or other supplier) until the good or service is transferred to a purchaser.
  2. b
    Typical contractor-subcontractor relationships in which the contractor is not in substance the owner of product held by the subcontractor and the obligation of the contractor is contingent on substantial performance on the part of the subcontractor.
  3. c
    Long-term unconditional purchase obligations (for example, take-or-pay contracts) specified by Subtopic 440-10 on commitments. At the time a take-or-pay contract is entered into, which is an unconditional purchase obligation, either the product does not yet exist (for example, electricity) or the product exists in a form unsuitable to the purchaser (for example, unmined coal); the purchaser has a right to receive future product but is not the substantive owner of existing product.
  4. d
    Unmined or unharvested natural resources and financial instruments.
  5. e
    Contracts within the scope of Topic 606 on revenue from contracts with customers. For example, contracts that are subject to a right of return as described in paragraph 606-10-32-10 and paragraphs
    606-10-55-22 through 55-29
    and contracts in which a sponsor (the entity seeking to finance product pending its future use or resale) sells the product to another entity (the entity through which the financing flows) and in a related transaction agrees to repurchase the product (or a substantially identical product). Such contracts are within the scope of Topic 606; see paragraphs
    606-10-55-66 through 55-78
    on repurchase agreements and paragraphs
    606-10-55-36 through 55-40
    on principal versus agent considerations.
  6. f
    Typical purchases by a subcontractor on behalf of a contractor. In a typical contractor-subcontractor relationship, the purchase of product by a subcontractor on behalf of a contractor ordinarily leaves a significant portion of the subcontractor's obligation unfulfilled. The subcontractor has the risks of ownership of the product until it has met all the terms of a contract. Accordingly, the typical contractor-subcontractor relationship shall not be considered a product financing arrangement.
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