{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/605/35/#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":"605","topic_title":"Revenue Recognition","subtopic":"605-35","subtopic_title":"Construction-Type and Production-Type Contracts","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":"605-35-15-1","para":"15-1","html":"
The guidance in this Subtopic applies to all contractors.
","snippet":"The guidance in this Subtopic applies to all contractors.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e41a64d03147230710a175de3605cac684f6b5bcd7b7e427c5cbc17449b7600","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fe9bb6ec0e3d3e788401683de782602c5d694880c55d564afd4346a9a6d74975","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}},{"block":null,"heading":"Types of Contracts","paragraphs":[{"citation":"605-35-15-2","para":"15-2","html":"
The guidance in this Subtopic applies to:
  1. a
    The performance of contracts for which specifications are provided by the customer for the construction of facilities or the production of goods or the provision of related services. However, it applies to separate contracts to provide services essential to the construction or production of tangible property, such as design, engineering, procurement, and construction management (see paragraph 605-35-15-3 for examples). Contracts covered by this Subtopic are binding agreements between buyers and sellers in which the seller agrees, for compensation, to perform a service to the buyer's specifications. Specifications imposed on the buyer by a third party (for example, a government or regulatory agency or a financial institution) or by conditions in the marketplace are deemed to be buyer's specifications.
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Contracts covered by this Subtopic include, but are not limited to, the following:
  1. a
    Contracts in the construction industry, such as those of general building, heavy earth moving, dredging, demolition, design-build contractors, and specialty contractors (for example, mechanical, electrical, or paving). In general the type of contract here under consideration is for construction of a specific project. While such contracts are generally carried on at the job site, this Subtopic also would be applicable in appropriate cases to the manufacturing or building of special items on a contract basis in a contractor's own plant.
  2. b
    Contracts to design and build ships and transport vessels.
  3. c
    Contracts to design, develop, manufacture, or modify complex aerospace or electronic equipment to a buyer's specification or to provide services related to the performance of such contracts.
  4. d
    Contracts for construction consulting service, such as under agency contracts or construction management agreements.
  5. e
    Contracts for services performed by architects, engineers, or architectural or engineering design firms.
  6. f
    Arrangements to deliver software or a software system, either alone or together with other products or services, requiring significant production, modification, or customization of software.
","snippet":"Contracts covered by this Subtopic include, but are not limited to, the following:\n(a) Contracts in the construction industry, such as those of general building, heavy earth moving, dredging, demolition, design-build con…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:037b1af70aafb25e0c7c9fe637d3ea72d74810ff21a922db89ad7e88a5d8b315","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}},{"citation":"605-35-15-4","para":"15-4","html":"
Contracts covered by this Subtopic may be classified into four broad types based on methods of pricing:
  1. a
    A fixed-price contract is an agreement to perform all acts under the contract for a stated price.
  2. b
    A cost-type (including cost-plus) contract is an agreement to perform under a contract for a price determined on the basis of a defined relationship to the costs to be incurred, for example, the costs of all acts required plus a fee, which may be a fixed amount or a fixed percentage of the costs incurred.
  3. c
    A time-and-material contract is an agreement to perform all acts required under the contract for a price based on fixed hourly rates for some measure of the labor hours required (for example, direct labor hours) and the cost of materials.
  4. d
    A unit-price contract is an agreement to perform all acts required under the contract for a specified price for each unit of output.
","snippet":"Contracts covered by this Subtopic may be classified into four broad types based on methods of pricing:\n(a) A fixed-price contract is an agreement to perform all acts under the contract for a stated price.\n(b) A cost-typ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e55f95f5447fec3343437f8605929eee1c5e74aff176a1a610c4e8813bd7f772","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}},{"citation":"605-35-15-5","para":"15-5","html":"
Each of the various types of contracts may have incentive, penalty, or other provisions that modify their basic pricing terms. The glossary definitions for each of the contract types listed in the preceding paragraph contain greater detail about the pricing features.
","snippet":"Each of the various types of contracts may have incentive, penalty, or other provisions that modify their basic pricing terms. The glossary definitions for each of the contract types listed in the preceding paragraph con…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:33db7cad17d587e77697e7aae7d4cb1fbf2933a1aa7f267a1603e18d24057d8e","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}},{"citation":"605-35-15-6","para":"15-6","html":"
Contracts not covered by this Subtopic include, but are not limited to, the following:
  1. a
    Sales by a manufacturer of goods produced in a standard manufacturing operation, even if produced to buyers' specifications, and sold in the ordinary course of business through the manufacturer's regular marketing channels, if such sales are normally recognized as the sale of goods and if their costs are accounted for in accordance with generally accepted principles of inventory costing.
  2. b
    Sales or supply contracts to provide goods from inventory or from homogeneous continuing production over a period of time.
  3. c
    Contracts included in a program and accounted for under the program method of accounting. For accounting purposes, a program consists of a specified number of units of a basic product expected to be produced over a long period in a continuing production effort under a series of existing and anticipated contracts.
  4. d
    Service contracts of health clubs, correspondence schools, and similar consumer-oriented entities that provide their services to their clients over an extended period.
  5. e
    Magazine subscriptions.
  6. f
    Contracts of not-for-profit entities (NFPs) to provide benefits to their members over a period of time in return for membership dues.
  7. g
    Contracts for which other Topics in the Codification provide special methods of accounting, such as leases.
  8. h
    Cost-plus-fixed-fee government contracts, which are discussed in Topic 912, other types of cost-plus-fee contracts, or contracts such as those for products or services customarily billed as shipped or rendered.
  9. i
    Federal government contracts within the scope of that Topic.
  10. j
    Service transactions between a seller and a purchaser in which, for a mutually agreed price, the seller performs, agrees to perform at a later date, or agrees to maintain readiness to perform an act or acts, including permitting others to use entity resources that do not alone produce a tangible commodity or product as the principal intended result (for example, services, not plans, are usually the principal intended result in a transaction between an architect and the customer of an architect).
","snippet":"Contracts not covered by this Subtopic include, but are not limited to, the following:\n(a) Sales by a manufacturer of goods produced in a standard manufacturing operation, even if produced to buyers' specifications, and …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:965a03d5494a8c3f3b3a2b64149b822b158f53b2e20f07d18f42c1001f1d5c66","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0d7fdf49257ca8e4b8cbacce6bfee4ec87752d6341c2dffde947c74619e585c8","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9033f410d608496ea2ecc9bc92e2e42b03d1bf806a49767f3b35d3c396a1571","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9033f410d608496ea2ecc9bc92e2e42b03d1bf806a49767f3b35d3c396a1571","downloaded_from":"2026-09-10T00:43:39.399Z","last_downloaded_at":"2026-09-10T00:43:39.399Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481270","source_sha256":"292806b4be8e466ec0439cecbf2ae97a09c86661d1118a8a33424b7132b094f4"}}