ASC 720-40

Electronic Equipment Waste Obligations

720 Other Expenses

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In brief

IntermediateRecognition Subsequent measurement Contingencies and guarantees Industry-specific

ASC 720-40 addresses when a producer must recognize a liability and expense for the cost of disposing of "historical waste" electrical and electronic equipment held by private households under EU Directive 2002/96/EC (WEEE). Because the Directive funds historical household waste collectively by producers selling in the market during a country-defined measurement period, the obligating event is participation in that market — so no liability may be recognized before the measurement period begins, regardless of how much qualifying equipment the producer previously sold (720-40-25-1). The liability is accrued over the measurement period based on estimated total program costs and the producer's estimated market share, and is adjusted as actual data arrives (720-40-25-3; 720-40-35-1).

Key points (7)

The Subtopic applies only to historical waste (products put on the EU market on or before August 13, 2005) held by private households; commercial-user historical waste and new waste are scoped out and addressed elsewhere (720-40-05-3; 720-40-05-4; 720-40-15-2).
The obligation for financing household historical waste is triggered by participation in the market during the measurement period defined by each EU-member country and shall not be recognized before that period begins (720-40-25-1).
Equipment qualifying as historical waste that the producer sold before the measurement period is disregarded in determining the obligation (720-40-25-1).
Each producer contributes proportionately based on market participation (for example, share of market by type of equipment), with the exact allocation method set by each EU-member country (720-40-25-2).
Where allocation is by market share during the period, a liability and offsetting expense are recognized over the measurement period based on estimated total allocable program costs multiplied by estimated market share (720-40-25-3).
The liability shall be adjusted as actual market share and program cost information is received (720-40-35-1).
Costs of new-equipment waste (products marketed after August 13, 2005) are borne solely by the producers of that new equipment and are accounted for under Subtopic 410-20 (720-40-05-3, referencing 410-20-55-23).

For students. This is a classic "what is the obligating event?" question: students often assume the liability arises when the equipment was originally sold, but under the WEEE scheme for household historical waste it arises only from selling in the market during the measurement period, so a producer that exits the market recognizes nothing. Note the split in guidance — household historical waste here in 720-40, commercial-user historical waste and new waste under 410-20.

historical waste new waste weee directive 2002/96/ec measurement period market share allocation obligating event liability recognition and adjustment private households vs. commercial users

Machine-generated study aid for ASC 720-40. Check the source paragraphs below.

720-40-05Overview and Background

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720-40-05-1

This Subtopic provides guidance on accounting for historical electronic equipment waste held by private households for obligations associated with Directive 2002/96/EC on Waste Electrical and Electronic Equipment adopted by the European Union.

720-40-05-2

This Subtopic refers to and paraphrases various provisions of the Directive. Nothing in this Subtopic shall be considered a definitive interpretation of any provision of the Directive for any purpose.

720-40-05-3

The Directive distinguishes between new and historical waste. New waste relates to products put on the market after August 13, 2005. All products put on the market on or before August 13, 2005, are deemed to be historical waste equipment for the purposes of the Directive. This Subtopic does not address the accounting for new waste. As explained in paragraph 410-20-55-23, costs relating to waste of new equipment are to be borne solely by the producers of the new equipment.

720-40-05-4

For the financing of historical waste, the Directive also distinguishes between historical waste from private households and historical waste from users other than private households (commercial users).

This Subtopic provides guidance for historical waste from private households, while Subtopic 410-20 provides guidance for historical waste from commercial users.

720-40-15Scope and Scope Exceptions

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Entities

720-40-15-1

The guidance in this Subtopic applies to all entities affected by Directive 2002/96 on Waste Electrical and Electronic Equipment adopted by the European Union.

Transactions

720-40-15-2

The guidance in this Subtopic does not apply to the following transactions and activities:

a
Historical waste from commercial users as addressed in Subtopic 410-20
b
New waste as defined in the Directive.

720-40-25Recognition

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720-40-25-1

The financing of historical waste held by private households is to be borne collectively by producers that are selling in the market during each measurement period (to be defined by each EU-member country). The obligation is triggered by participation in the market during the measurement period and, therefore, shall not be recognized before the beginning of that period. The volume of equipment that qualifies as historical waste that those producers have sold in the market before the measurement period is not considered.

720-40-25-2

Producers will be required to contribute proportionately based on their participation in the market (for example, in proportion to their respective share of the market by type of equipment). However, the exact method to be used to compute the respective proportions to be contributed by producers will be determined by each EU-member country.

720-40-25-3

If, for example, the method is based on each producer's respective share of the market by type of equipment during the measurement period, a liability for the obligation, with an offsetting amount to expense, shall be recognized over the measurement period for the appropriate portion of the cost based on the estimated total allocable costs of the waste management program and that producer's estimated market share.

720-40-30Initial Measurement

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720-40-30-1

See Section 720-40-25 for a discussion of measurement issues.

720-40-35Subsequent Measurement

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720-40-35-1

The liability shall be adjusted as actual market share and program cost information is received.

720-40-55Implementation Guidance and Illustrations

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Illustrations

720-40-55-1

This Example illustrates the guidance in Sections 720-40-25 and 720-40-35.

720-40-55-2

An entity is a producer of electronic equipment that is covered by the Directive. The entity has produced and sold this type of electronic equipment for several years. In the EU-member country in which the entity operates, legislation requires producers to be responsible for costs associated with the disposal of electronic equipment from private households based on each producer's participation in the market, measured by market share, during the measurement period. The EU-member country has defined the measurement period as calendar-year 2005. The entity achieves a 4 percent market share in 2004 and expects to achieve a 5 percent market share in 2005.

720-40-55-3

The entity should not recognize a liability in 2004 for the costs associated with the disposal of historical waste held by private households. The obligation is triggered by participation in the market during 2005 (the measurement period). A liability for the obligation, with an offsetting amount to expense, should be recognized over the year for the appropriate portion of the annual cost based on its estimated percent market share. The liability should be adjusted as actual market share information is received. The entity should recognize a liability relating to historical waste costs incurred during 2006 as the entity participates in the market in 2006.