ASC 705-10

Overall

705 Cost of Sales and Services

Download JSON Download Markdown25 paragraphs · 4 sectionsJump to summary

Source downloaded: 2026-09-10T00:55:50.312Z.Record version 59db9b56b509. Effective date must be checked in the source.

In brief

IntroductoryRecognition Inventory and PP&E Revenue Financial statement presentation

ASC 705-10 is a "pointer" subtopic: it contains almost no substantive rules of its own and instead links to the Topics where cost of sales and services guidance actually resides. This structure follows from the Codification's asset liability model, under which costs are recognized as assets are sold or remeasured (or liabilities incurred), so the guidance sits in Topics such as 330 (inventory), 360 (PP&E), 606/340-40 (customer contracts), and 718 (share-based payment).

Key points (7)

Topic 705 comprises two subtopics — Overall (705-10) and Accounting for Consideration Received from a Vendor (705-20) (705-10-05-1).
705-10 provides only links to other Subtopics because the asset liability model places cost-of-sales guidance in the Derecognition and Subsequent Measurement Sections of the related asset Topics, e.g., Topic 330 and Topic 360 (705-10-05-1A; 705-10-25-1).
Inventory-driven cost of sales adjustments are governed by 330-10-35-1A through 35-11 (subsequent measurement) and 330-10-30-1 through 30-13 (cost basis and inventory pricing methods) (705-10-25-2; 705-10-25-3).
Sales with a right of return follow Topic 606, specifically 606-10-32-10 and 606-10-55-22 through 55-29 (705-10-25-4).
Incremental costs of obtaining a contract with a customer and fulfillment costs not within another Topic's scope are accounted for under Subtopic 340-40 (705-10-25-4A).
Other cross-references: 360-10-35-38 through 35-40 (costs to sell held-for-sale long-lived assets), 270-10-45-4 through 45-6 (interim reporting), 605-20-25-6 (loss on separately priced extended warranty and product maintenance contracts), 718-10-25 (share-based payment), 985-330 (software duplication and packaging), 350-40 (internal-use software sold) (705-10-25-5 through 25-15).
All of Section 705-10-45 and several Section 25 paragraphs were superseded by ASU 2014-09, so legacy cost-of-sales presentation guidance now flows through Topic 606 and Subtopic 340-40.

For students. The point here is structural, not substantive: there is no freestanding "cost of sales" standard in U.S. GAAP, so you must locate the rule in the asset or contract Topic (330, 360, 606, 340-40, 718). A common misunderstanding is treating ASC 705-10 as authority for measuring cost of goods sold; the only real substance in Topic 705 is in 705-20 on vendor consideration.

cost of sales and services asset liability model cross-reference subtopic inventory pricing methods right of return costs to obtain and fulfill a contract costs to sell long-lived assets interim cost recognition

Machine-generated study aid for ASC 705-10. Check the source paragraphs below.

705-10-00Status

Source downloaded: 2026-09-10T00:55:38.735Z.Record version fea75cf4bdb4. Effective date must be checked in the source.

705-10-00-1

The following table identifies the changes made to this Subtopic.

Paragraph	Action	Accounting Standards Update	Date

Contract	Added	Accounting Standards Update No. 2014-09	05/28/2014
Customer	Added	Accounting Standards Update No. 2014-09	05/28/2014
Revenue	Added	Accounting Standards Update No. 2014-09	05/28/2014

705-10-05-1	Amended	Accounting Standards Update No. 2014-09	05/28/2014
705-10-05-1A	Added	Accounting Standards Update No. 2014-09	05/28/2014
705-10-05-2	Amended	Accounting Standards Update No. 2014-09	05/28/2014
705-10-25-2	Amended	Accounting Standards Update No. 2015-11	07/22/2015
705-10-25-4	Amended	Accounting Standards Update No. 2014-09	05/28/2014
705-10-25-4A	Added	Accounting Standards Update No. 2014-09	05/28/2014
705-10-25-6	Superseded	Accounting Standards Update No. 2014-09	05/28/2014
705-10-25-8	Amended	Accounting Standards Update No. 2014-09	05/28/2014
705-10-25-9	Amended	Accounting Standards Update No. 2014-09	05/28/2014
705-10-25-10 through 25-12	Superseded	Accounting Standards Update No. 2014-09	05/28/2014
705-10-45-1 through 45-5	Superseded	Accounting Standards Update No. 2014-09	05/28/2014

705-10-05Overview and Background

Source downloaded: 2026-09-10T00:55:41.102Z.Record version cb1d915212b6. Effective date must be checked in the source.

705-10-05-1

The Cost of Sales and Services Topic includes the following Subtopics:

a
Overall
b
Accounting for Consideration Received from a Vendor.

705-10-05-1A

The Overall Subtopic only provides links to guidance on accounting for the cost of sales and services in other applicable Subtopics because the asset liability model used in the Codification generally results in the inclusion of that guidance in other Topics. For example, because assets are sold or remeasured (or liabilities are incurred), the guidance related to the transactions is included in the applicable Derecognition and Subsequent Measurement Sections of Topic 330 on inventory and Topic 360 on plant, property, and equipment rather than in this Topic.

705-10-05-2

Included in Section 705-10-25 are links to certain other Subtopics containing guidance applicable to the recognition of cost of sales and services.

705-10-25Recognition

Source downloaded: 2026-09-10T00:55:47.878Z.Record version d4704ac31953. Effective date must be checked in the source.

705-10-25-1

This Section consists solely of links to other Subtopics because the asset liability model used in the Codification requires that applicable guidance be included in other Topics. In addition, the following may not represent a complete list of other Topics containing cost of sales and services guidance.

Inventory

705-10-25-2

See paragraphs

330-10-35-1A through 35-11

for adjustments affecting cost of sales and services resulting from the subsequent measurement of inventory.

705-10-25-3

See paragraphs

330-10-30-1 through 30-13

for adjustments affecting cost of sales and services resulting from establishing the cost basis and the use of inventory pricing methods.

705-10-25-4

See Topic 606 on revenue from contracts with customers, specifically paragraph 606-10-32-10 and paragraphs

606-10-55-22 through 55-29

for the accounting for a sale with a right of return.

Other Assets and Deferred Costs—Contracts with Customers

705-10-25-4A

See Subtopic 340-40 for guidance on the following costs related to a contract with a customer within the scope of Topic 606 on revenue from contracts with customers:

a
Incremental costs of obtaining a contract with a customer
b
Costs incurred in fulfilling a contract with a customer that are not within the scope of another Topic.

Property, Plant, and Equipment

705-10-25-5

See paragraphs

360-10-35-38 through 35-40

for a discussion of the costs to sell long-lived assets classified as held for sale for purposes of measuring the expected disposal loss.

705-10-25-6

Paragraph superseded by Accounting Standards Update No. 2014-09.

Interim Financial Reporting

705-10-25-7

See paragraphs

270-10-45-4 through 45-6

for a discussion of recognition principles used for cost of sales and services used in reporting on an interim basis.

Extended Warranty and Product Maintenance Contracts

705-10-25-8

See paragraph 605-20-25-6 for guidance on recognizing a loss on separately priced extended warranty and product maintenance contracts.

Consideration Received from a Vendor

705-10-25-9

See Subtopic 705-20 for a discussion of consideration received from a vendor by a customer.

705-10-25-10

Paragraph superseded by Accounting Standards Update No. 2014-09.

705-10-25-11

Paragraph superseded by Accounting Standards Update No. 2014-09.

705-10-25-12

Paragraph superseded by Accounting Standards Update No. 2014-09.

705-10-25-13

See Section 718-10-25 for a discussion of recognition principles for costs incurred under share-based payment transactions.

Costs of Computer Software Sold

705-10-25-14

For guidance on costs incurred for duplicating the computer software, documentation, and training materials from product masters and for physically packaging the product for distribution, see Subtopic 985-330.

705-10-25-15

See Subtopic 350-40 for a discussion of the cost of internal-use computer software sold.