# ASC 605-35-15: Revenue Recognition — Construction-Type and Production-Type Contracts — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/605/35/#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): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:b9033f410d608496ea2ecc9bc92e2e42b03d1bf806a49767f3b35d3c396a1571 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-35-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/605/35/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [605-35-15-1](https://asc.understandingaccounting.org/asc/605/35/#605-35-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:5e41a64d03147230710a175de3605cac684f6b5bcd7b7e427c5cbc17449b7600 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all [contractors](https://asc.understandingaccounting.org/glossary/c/#contractor "A person or entity that enters into a contract to construct facilities, produce goods, or render services to the specifications of a buyer either as a general or prime contractor, as a subcontractor to a general contractor, or as a construction manager."). #### Types of Contracts ##### [605-35-15-2](https://asc.understandingaccounting.org/asc/605/35/#605-35-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:68502c3243159dac20e39d0ad6ba878ba589c7f0d1f443c1b0191604eab6a0fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to: 1. a The performance of [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") for which specifications are provided by the [customer](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 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](https://asc.understandingaccounting.org/asc/605/35/#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. ##### [605-35-15-3](https://asc.understandingaccounting.org/asc/605/35/#605-35-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:037b1af70aafb25e0c7c9fe637d3ea72d74810ff21a922db89ad7e88a5d8b315 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [605-35-15-4](https://asc.understandingaccounting.org/asc/605/35/#605-35-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:e55f95f5447fec3343437f8605929eee1c5e74aff176a1a610c4e8813bd7f772 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contracts covered by this Subtopic may be classified into four broad types based on methods of pricing: 1. a A [fixed-price contract](https://asc.understandingaccounting.org/glossary/f/#fixed-price-contracts "A fixed-price or lump-sum contract is a contract in which the price is not usually subject to adjustment because of costs incurred by the contractor. See also the following common variations of fixed-price contracts: Firm Fixed-Price Contract Fixed-Price Contract with Economic Price Adjustment Fixed-Price Contract Providing for Prospective Periodic Redetermination of Price Fixed-Price Contract Providing for Retroactive Redetermination of Price Fixed-Price Contract Providing for Firm Target Cost Incentives Fixed-Price Contract Providing for Successive Target Cost Incentives Fixed-Price Contract Providing for Performance Incentives Fixed-Price Level-of-Effort Term Contract.") is an agreement to perform all acts under the contract for a stated price. 2. b A [cost-type (including cost-plus) contract](https://asc.understandingaccounting.org/glossary/c/#cost-type-contracts "Contracts that provide for reimbursement of allowable or otherwise defined costs incurred plus a fee that represents profit. Cost-type contracts usually only require that the contractor use his best efforts to accomplish the scope of the work within some specified time and some stated dollar limitation. See also the following common variations of cost-plus contracts: Cost-Plus-Award-Fee Contract Cost-Plus-Fixed-Fee Contract Cost-Plus-Incentive-Fee Contract (Incentive Based on Cost) Cost-Plus-Incentive-Fee Contract (Incentive Based on Performance) Cost-Sharing Contract Cost-Without-Fee 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](https://asc.understandingaccounting.org/glossary/a/#time-and-material-contracts "Contracts that generally provide for payments to the contractor on the basis of direct labor hours at fixed hourly rates (that cover the cost of direct labor and indirect expenses and profit) and cost of materials or other specified costs. Common variations of time and material contracts areas follows: Time at marked-up rate Time at marked-up rate, material at cost Time and material at marked-up rates Guaranteed maximum cost—labor only or labor and material.") 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](https://asc.understandingaccounting.org/glossary/a/#unit-price-contracts "Contracts under which the contractor is paid a specified amount for every unit of work performed. A unit-price contract is essentially a fixed-price contract with the only variable being units of work performed. Variations in unit-price contracts include the same type of variations as fixed-price contracts. A unit-price contract is normally awarded on the basis of a total price that is the sum of the product of the specified units and unit prices. The method of determining total contract price may give rise to unbalanced unit prices because units to be delivered early in the contract may be assigned higher unit prices than those to be delivered as the work under the contract progresses.") is an agreement to perform all acts required under the contract for a specified price for each unit of output. ##### [605-35-15-5](https://asc.understandingaccounting.org/asc/605/35/#605-35-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:33db7cad17d587e77697e7aae7d4cb1fbf2933a1aa7f267a1603e18d24057d8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [605-35-15-6](https://asc.understandingaccounting.org/asc/605/35/#605-35-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:43:39.399Z to 2026-09-10T00:43:39.399Z Record version: sha256:965a03d5494a8c3f3b3a2b64149b822b158f53b2e20f07d18f42c1001f1d5c66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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).