{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/605/905/#25-recognition","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":"605-905","subtopic_title":"Agriculture","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":"Income Replacement and Subsidy Programs","paragraphs":[{"citation":"605-905-25-1","para":"25-1","html":"
Income replacement and subsidy programs are designed to bring income from commodities to certain predetermined levels and include:
  1. a
    Deficiency payments, which are subsidy payments resulting from low prices for designated commodities.
  2. b
    Disaster payments, which may be made to producers when disasters prevent planting or reduce yields on crops.
  3. c
    Other programs, which are available to producers to encourage production, provide indemnity for certain types of losses, and reimburse producers for withholding land from production.
All of the above payments, while different in nature, constitute additional income and should be recorded when the amount of and right to receive the payment can be reasonably determined.
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A cooperative may incur an overall loss in a given year. The disposition of losses may be made based on bylaws or the board of directors' action. Agricultural cooperatives use a number of different methods for disposing of an overall loss, including the following:
  1. a
    Allocating the loss to patrons on the basis of current patronage. The loss may offset the patrons' equities, future patronage allocations, or future cash contributions.
  2. b
    Allocating the loss to all equities without considering current patronage. However, patrons with substantial equities and decreasing patronage may be treated inequitably if this method is used.
  3. c
    Charging the loss to unallocated retained earnings. This method is equitable when the loss is attributable to nonpatronage business.
  4. d
    Offsetting the loss against amounts available for patronage allocation in subsequent years before making any such allocation to patrons. This method may be acceptable if the patrons are substantially the same from year to year.
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Cooperatives operating on a functional or departmental basis may have net earnings from one function or department and operating losses from another. It is a common practice for losses from one function or department to be absorbed by profits from another function or department before earnings to patrons are allocated. Some cooperatives distribute departmental earnings to patrons and charge departmental losses to unallocated retained earnings.
","snippet":"Cooperatives operating on a functional or departmental basis may have net earnings from one function or department and operating losses from another. It is a common practice for losses from one function or department to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0db98b36b754e908e7e6a8fd5985f0c6f7ddf13a4343065d31a51327ff8487c","downloaded_from":"2026-09-10T00:45:53.183Z","last_downloaded_at":"2026-09-10T00:45:53.183Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478658","source_sha256":"2df9891c4c6ded92d23e2cb3953431b037610f2fc7b58cfc72bd41b247ce3536"}},{"citation":"605-905-25-4","para":"25-4","html":"
To allocate earnings to patrons equitably, cooperatives usually account for revenues and costs by function (supply or marketing) or departments within the function. Expenses common to one or more functions or departments shall be allocated on a reasonable and consistent basis. In addition, one department of a cooperative may handle several commodities, and departmental revenues and expenses may have to be allocated among them. Cooperatives may incur a loss in one department or function and realize earnings in another. Methods of accounting for these departmental and functional losses include the following:
  1. a
    Offsetting the losses of unprofitable departments against profitable ones, and allocating the remaining profit to the patrons of the profitable departments by using the allocation method adopted by the cooperative.
  2. b
    Recovering the loss from the patrons of that department or function on the basis of bylaw provisions or a marketing agreement.
  3. c
    Subtracting the loss from net nonpatronage income. Offsetting patronage losses against nonpatronage income may not eliminate the income tax due on the nonpatronage income of a nonexempt cooperative.
  4. d
    Charging the loss to unallocated retained earnings, and allocating income from profitable departments or functions to patrons on the basis of the cooperative's allocation methods.
  5. e
    Offsetting the losses against patronage allocation for subsequent years before making departmental and functional allocations to patrons.
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