# ASC 720-45: Other Expenses — Business and Technology Reengineering Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/45/) 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): 2026-09-10T01:08:49.463Z to 2026-09-10T01:09:03.528Z Record version: sha256:2f5f1052e65c6a9c2e641ba0427995b24d8c2e623fccef518e89a4c56e749798 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45: Other Expenses — Business and Technology Reengineering ### Machine-generated study aids ```json { "summary": "ASC 720-45 governs the accounting for costs of business process reengineering (BPR) activities, including those bundled into information technology transformation projects (e.g., enterprise software installations). The core rule is that BPR costs—whether performed internally or by third parties—must be expensed as incurred, even when they are part of a project to acquire, develop, or implement internal-use software. When a bundled third-party consulting contract covers multiple activities, the contract price must be allocated among activities based on objective evidence of relative fair values.", "key_points": [ "Business process reengineering costs, whether incurred internally or paid to third parties, are expensed as incurred, including when the reengineering is part of a project to acquire, develop, or implement internal-use software (720-45-25-1).", "Specific costs that must be expensed as incurred include preparation of a request for proposal, current state assessment (except as it relates to current software structure), process reengineering, and restructuring the work force (720-45-25-2).", "Costs in the property and equipment acquisition or construction phase of a BPR project follow the entity's existing policies for productive assets (720-45-25-4).", "For third-party projects, the total consulting contract price (or the sum of linked contracts with the same vendor) is allocated to each activity based on the relative fair values of those separate activities, using objective evidence of fair value rather than the prices stated in the contract (720-45-30-1).", "The Subtopic applies to all entities but does not address or change accounting for internal-use software development costs (Subtopic 350-40) or the acquisition of property and equipment (720-45-15-1 through 15-2).", "The illustrative table in 720-45-55-1 sorts typical project components among expensing under this Subtopic, treatment under the internal-use software guidance in 350-40, and capitalization as part of a fixed asset; ASU 2025-06 amends the table (transition date December 16, 2027; transition guidance in 350-40-65-4)." ], "categories": [ "Recognition", "Initial measurement", "Intangibles and goodwill", "Inventory and PP&E" ], "audience_level": "intermediate", "student_note": "The exam trap is assuming that because reengineering work is bundled into a capitalizable enterprise software or ERP implementation, the whole contract can be capitalized—720-45-25-1 requires the reengineering portion to be expensed, and 720-45-30-1 forces a relative-fair-value split of the bundled fee based on objective evidence, not the vendor's stated line-item prices.", "related_topics": [ "350-40", "360", "720-15", "420" ], "key_concepts": [ "business process reengineering", "information technology transformation", "expense as incurred", "current state assessment", "request for proposal", "relative fair value allocation", "internal-use software", "consulting contract" ] } ``` Source downloaded (UTC): 2026-09-10T01:08:49.463Z to 2026-09-10T01:08:49.463Z Record version: sha256:9cdf71e3ae2f615797c906f82faadfba137a347595821052c57918d462beb00a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/45/#00-status) SEC content: no ##### [720-45-00-1](https://asc.understandingaccounting.org/asc/720/45/#720-45-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:49.463Z to 2026-09-10T01:08:49.463Z Record version: sha256:c50090be6dcf92b2780af58ab3153135b31f0ff494535fc638ad781447b41a7e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
720-45-55-1AmendedAccounting Standards Update 2025-0609/18/2025
Source downloaded (UTC): 2026-09-10T01:08:52.286Z to 2026-09-10T01:08:52.286Z Record version: sha256:54463d858f5f06165feb62c637dbf6c11284711a7b401f37ba2874541d9cdb9a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/45/#05-overview-and-background) SEC content: no ##### [720-45-05-1](https://asc.understandingaccounting.org/asc/720/45/#720-45-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:52.286Z to 2026-09-10T01:08:52.286Z Record version: sha256:69aff7396a5a2aa005df3035912809bc01e4b7057ff54e0e5e456bc4b6a84d63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on costs associated with business process reengineering and information technology transformation projects. The following describes such projects. ##### [720-45-05-2](https://asc.understandingaccounting.org/asc/720/45/#720-45-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:52.286Z to 2026-09-10T01:08:52.286Z Record version: sha256:49b0701f419de4407bd30ccd97cb715a7fc8e028111c589a7acb6a91881336c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To take advantage of new advances in electronic commerce and in computer technologies, many entities are entering into consulting contracts that combine business process reengineering and information technology transformation. Consulting services may encompass software development, software acquisition, software implementation, training, and ongoing support. Business process reengineering may be a component of some of those activities. ##### [720-45-05-3](https://asc.understandingaccounting.org/asc/720/45/#720-45-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:52.286Z to 2026-09-10T01:08:52.286Z Record version: sha256:6c75e8838d28eeb5ef46a23b764a57c46986985ee38b4588eccebd89944dafca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Information technology transformation projects that involve software packages (sometimes called enterprise software) recently have been undertaken by entities that must reengineer their business processes to connect into that software rather than modify that software to connect into their existing business processes. The transformation project may include the installation of new computer hardware, the purchase of office equipment, furniture, or work stations, and the physical reconfiguration of the work area. Source downloaded (UTC): 2026-09-10T01:08:55.290Z to 2026-09-10T01:08:55.290Z Record version: sha256:f24c15410c4852b6a260bfb32feb175f51b7857262069de71b673842ae1406c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/45/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [720-45-15-1](https://asc.understandingaccounting.org/asc/720/45/#720-45-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:55.290Z to 2026-09-10T01:08:55.290Z Record version: sha256:86eb4626862185de611057688781396aaae4325f2bcc76237a26c7d242c6d3fb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Other Considerations ##### [720-45-15-2](https://asc.understandingaccounting.org/asc/720/45/#720-45-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:55.290Z to 2026-09-10T01:08:55.290Z Record version: sha256:2ad4bff43eb2c385d315b4c2d44df14b02277d3aa143b9cad3f0d5845a2b38a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not address or change current accounting practices for internal-use software development costs, which are addressed in Subtopic 350-40, or the acquisition of property and equipment. Source downloaded (UTC): 2026-09-10T01:08:57.730Z to 2026-09-10T01:08:57.730Z Record version: sha256:3e25ebed91410e422e03a69a1a054d7c1bf4e1b891dd56b4393137d9de2d414c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/45/#25-recognition) SEC content: no ##### [720-45-25-1](https://asc.understandingaccounting.org/asc/720/45/#720-45-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:57.730Z to 2026-09-10T01:08:57.730Z Record version: sha256:1ff6752e3eb616ffa19fb91625a1147da6339ea14b4fa9a0ca99738713332144 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost of business process reengineering activities, whether done internally or by third parties, is to be expensed as incurred. This expense treatment also applies when the business process reengineering activities are part of a project to acquire, develop, or implement internal-use software. ##### [720-45-25-2](https://asc.understandingaccounting.org/asc/720/45/#720-45-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:57.730Z to 2026-09-10T01:08:57.730Z Record version: sha256:1a5120564d01aaf54a26f038ed15fc7ea9820629716f141edf2c9f25f5cdf722 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following third-party or internally generated costs typically associated with business process reengineering shall be expensed as incurred: 1. a Preparation of request for proposal—the process of preparing a proposal. 2. b Current state assessment—the process of documenting the entity's current business process, except as it relates to current software structure. This activity is sometimes called mapping, developing an as-is baseline, flow charting, and determining current business process structure. 3. c Process reengineering—the effort to reengineer the entity's business process to increase efficiency and effectiveness. This activity is sometimes called analysis, determining best-in-class, profit and performance improvement development, and developing should-be processes. 4. d Restructuring the work force—the effort to determine what employee makeup is necessary to operate the reengineered business processes. ##### [720-45-25-3](https://asc.understandingaccounting.org/asc/720/45/#720-45-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:57.730Z to 2026-09-10T01:08:57.730Z Record version: sha256:9c3448f44518eb077ade7909a68aea2fa8da15a8b113f1fa5316f44f11ae94a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Internal and third-party personnel involved with current state assessment, process reengineering, and restructuring the work force usually have backgrounds in business function, business control, internal audit, internal control, and so forth. Although some may have information technology and software application expertise, the focus of this effort is on process rather than software systems. ##### [720-45-25-4](https://asc.understandingaccounting.org/asc/720/45/#720-45-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:57.730Z to 2026-09-10T01:08:57.730Z Record version: sha256:fe299c7b581cee716be2fd7f78c2bc3ee9d9044a7b0ad3cb5d980444fe6d439e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs typically associated with the acquisition or the construction of property and equipment phase of a business process reengineering project shall be accounted for in accordance with the entity's existing policies for productive assets. Source downloaded (UTC): 2026-09-10T01:08:59.967Z to 2026-09-10T01:08:59.967Z Record version: sha256:ad9f62698f4bd462551e653dcb497ea49a58155eee4f5c4835fdb6b9f190755e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/45/#30-initial-measurement) SEC content: no ##### [720-45-30-1](https://asc.understandingaccounting.org/asc/720/45/#720-45-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:59.967Z to 2026-09-10T01:08:59.967Z Record version: sha256:26bf8d59aa68bf5a3351826ab4850466a613ac5ed4646e4cd1ac3eb3e47f9e94 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a third party is used for a business process reengineering project, the total consulting contract price (or the sum of the linked contracts with the same vendor) shall be allocated to each activity based on the relative fair values of those separate activities. The allocation shall be based on the objective evidence of the fair value of the elements in the contract, not necessarily the separate prices stated within the contract for each element. Source downloaded (UTC): 2026-09-10T01:09:03.528Z to 2026-09-10T01:09:03.528Z Record version: sha256:f6c691331db216896c71e8adf3610834af5ddb5dc4be47824dbaff60182726a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-45-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/45/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [720-45-55-1](https://asc.understandingaccounting.org/asc/720/45/#720-45-55-1) Pending content: yes Source downloaded (UTC): 2026-09-10T01:09:03.528Z to 2026-09-10T01:09:03.528Z Record version: sha256:1dd6429d03253b169f88ef6375afe76ab32585ce756ca3c4c50017b30d1753c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table sets forth the accounting for typical components of a business process reengineering/information technology transformation project based on whether the item should be: 1. a Expensed as incurred in accordance with the guidance contained in this Subtopic 2. b Expensed as incurred in accordance with internal-use software guidance contained in Subtopic 350-40 3. c Capitalized in accordance with internal-use software guidance contained in Subtopic 350-40 4. d Capitalized as part of the cost of acquiring a fixed asset in accordance with a company's existing policy. (Note that letters in the grid refer to the corresponding guidance listed above.) - ![](https://asc.understandingaccounting.org/asc-img/GUID-C13FBC10-DAC6-403B-B430-8C749D60705A-low.gif) Third Party Internal Steps Expense Capitalize Expense Capitalize Business process reengineering and information technology transformation: Preparation of request for proposal a a Current state assessment a a Process reengineering a a Restructuring work force a a Preliminary software project stage activities: Conceptual formulation of alternatives b b Evaluation of alternatives b b Determination of existence of needed technology b b Final selection of alternatives b b Application development stage activities: "Design of chosen path, including software configuration and software interface" c c Coding c c Installation to hardware c c "Testing, including parallel processing phase" c c Data conversion costs: a. Costs to develop or obtain software that allows for access of old data by new system c c b. All other data conversion processes b b Training b b Post-implementation/operation stage activities: Training b b Application maintenance b b Ongoing support b b Acquisition of fixed assets: "Purchase of new computer equipment, office furniture, or work stations" d N/A N/A Reconfiguration of work area—architect fees and hard construction costs d d Transition date:(P) December 16, 2027; (N) December 16, 2027Transition guidance: [350-40-65-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-65-4)The following table sets forth the accounting for typical components of a business process reengineering/information technology transformation project based on whether the item should be: 1. a Expensed as incurred in accordance with the guidance contained in this Subtopic 2. b [Subparagraph superseded by Accounting Standards Update No. 2025-06](https://asc.understandingaccounting.org/updates/asu-2025-06/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2025-06](https://asc.understandingaccounting.org/updates/asu-2025-06/). 4. d Capitalized as part of the cost of acquiring a fixed asset in accordance with a company's existing policy 5. e Capitalized or expensed in accordance with the internal-use software guidance contained in Subtopic 350-40. (Note that letters in the grid refer to the corresponding guidance listed above.) - ![](https://asc.understandingaccounting.org/asc-img/GUID-960B46E9-0EF8-4D2A-8260-05C8D4907350-low.gif) Third Party Internal Steps Expense Capitalize Expense Capitalize Business process reengineering and information technology transformation: Preparation of request for proposal a a Current state assessment a a Process reengineering a a Restructuring work force a a "Acquire, develop, or implement internal-use software" e e e e Acquisition of fixed assets: "Purchase of new computer equipment, office furniture, or work stations" d N/A N/A Reconfiguration of work area—architect fees and hard construction costs d d