ASC 720-908

Airlines

720 Other Expenses

Download JSON Download Markdown7 paragraphs · 4 sectionsJump to summary

Source downloaded: 2026-09-10T01:09:37.136Z.Record version 1134d8238d55. Effective date must be checked in the source.

In brief

IntermediateRecognition Industry-specific Inventory and PP&E

ASC 720-908 governs how airlines account for route developmental costs, preoperating costs, and certain maintenance/overhaul costs. The core rule is expense-as-incurred: because route expansion is a normal, recurring activity in a deregulated environment with uncertain recoverability, these costs may not be capitalized. It also addresses the direct expensing method for overhauls and the cost of repairing rotables.

Key points (6)

The Subtopic covers developmental costs (including those directly related to developing new routes), preoperating costs (including initial preparation for a new route or new aircraft type), and overhaul costs under the direct expensing method (720-908-05-1).
Route developmental costs related to preparing operations of new routes shall not be capitalized because deregulation makes recoverability uncertain and route expansion or alteration is a normal, recurring cost of doing business (720-908-25-1).
Preoperating costs shall be expensed as incurred rather than capitalized (720-908-25-2).
Under the direct expensing method most carriers expense overhaul costs as incurred, since for large fleets such costs are relatively constant period to period; accounting method alternatives are in 908-360-25-2 (720-908-25-3).
The cost of repairing rotables shall be charged to expense as incurred, with related guidance at 908-360-35-2 and 908-360-45-1 (720-908-25-4).
Scope follows the airline Overall Subtopic scope in Section 908-10-15 (720-908-15-1).

For students. This is a bright-line "no capitalization" rule: airlines cannot defer start-up-type route and preoperating costs even though they expect future benefits. Students often confuse the direct expensing method for overhauls (720-908) with the built-in overhaul and deferral methods addressed in 908-360.

route developmental costs preoperating costs expense as incurred overhaul costs direct expensing method rotables airline industry capitalization prohibition

Machine-generated study aid for ASC 720-908. Check the source paragraphs below.

720-908-00Status

Source downloaded: 2026-09-10T01:09:26.801Z.Record version a13509b8a155. Effective date must be checked in the source.

720-908-00-1

The following table identifies the changes made to this Subtopic.

Paragraph	Action	Accounting Standards Update	Date

908-720-25-1	Amended	Accounting Standards Update No. 2014-09	05/28/2014

720-908-05Overview and Background

Source downloaded: 2026-09-10T01:09:28.531Z.Record version 80a7f4d461a7. Effective date must be checked in the source.

720-908-05-1

This Subtopic provides accounting guidance for the following costs for entities in the airline industry:

a
Developmental costs, including those directly related to the development of new routes
b
Preoperating costs, including initial preparation costs for a new route or new type of aircraft
c
Overhaul costs using the direct expensing method.

720-908-15Scope and Scope Exceptions

Source downloaded: 2026-09-10T01:09:31.012Z.Record version 38ab6a2ddb97. Effective date must be checked in the source.

Overall Guidance

720-908-15-1

This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 908-10-15.

720-908-25Recognition

Source downloaded: 2026-09-10T01:09:37.136Z.Record version a2ce8405724f. Effective date must be checked in the source.

Developmental Costs

720-908-25-1

Because of the current deregulated environment and the uncertainty regarding the recoverability of route developmental costs, such costs related to the preparation of operations of new routes shall not be capitalized. Route expansion or alteration has become a recurring activity among the airlines, and any related cost shall be considered a normal and recurring cost of conducting business.

Preoperating Costs

720-908-25-2

Preoperating costs shall be expensed as incurred rather than capitalized.

Overhaul Costs—Direct Expensing Method

720-908-25-3

Paragraph 908-360-25-2 provides guidance on accounting methods for overhaul expenses. Most carriers recognize the cost of overhauls as expenses as they are incurred because, in the case of carriers with large fleets, such costs are relatively constant from period to period.

Rotables

720-908-25-4

The cost of repairing rotables shall be charged to expense as it is incurred. See also guidance in paragraphs 908-360-35-2 and 908-360-45-1 concerning rotables.