# ASC 470-40-15: Debt — Product Financing Arrangements — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/40/#15-scope-and-scope-exceptions) 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): 2026-09-10T00:32:34.310Z to 2026-09-10T00:32:34.310Z Record version: sha256:f47faa398238791b6d8ae2de1fdb411520c83b3133a915e0064bdd2db74e1356 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-40-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/470/40/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [470-40-15-1](https://asc.understandingaccounting.org/asc/470/40/#470-40-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:34.310Z to 2026-09-10T00:32:34.310Z Record version: sha256:42dc5d2d130299dcff511a796d16839eaa2156e7ba2edd7a8275245bbd4bcab3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Transactions ##### [470-40-15-2](https://asc.understandingaccounting.org/asc/470/40/#470-40-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:34.310Z to 2026-09-10T00:32:34.310Z Record version: sha256:ffa4d5f034f683c9937c87456a99e987a2324e0c628df71294bef802e713a6e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to [product financing arrangements](https://asc.understandingaccounting.org/glossary/p/#product-financing-arrangement "A product financing arrangement is a transaction in which an entity sells and agrees to repurchase inventory with the repurchase price equal to the original sale price plus carrying and financing costs, or other similar transactions.") 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. ##### [470-40-15-3](https://asc.understandingaccounting.org/asc/470/40/#470-40-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:34.310Z to 2026-09-10T00:32:34.310Z Record version: sha256:cb8c7879fbd012dad42892f039dbc73a59614dde2ae24ddfa9ecb723d682bc18 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/glossary/u/#unconditional-purchase-obligation "An obligation to transfer funds in the future for fixed or minimum amounts or quantities of goods or services at fixed or minimum prices (for example, as in take-or-pay contracts or throughput contracts).") (for example, [take-or-pay contracts](https://asc.understandingaccounting.org/glossary/t/#take-or-pay-contract "An agreement between a purchaser and a seller that provides for the purchaser to pay specified amounts periodically in return for products or services. The purchaser must make specified minimum payments even if it does not take delivery of the contracted products or services.")) 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](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") within the scope of Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from contracts with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). For example, contracts that are subject to a right of return as described in paragraph [606-10-32-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-10) and paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) 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](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) on repurchase agreements and paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) 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.