# ASC 720-946: Other Expenses — Financial Services—Investment Companies Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/946/) 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): 2026-09-10T01:11:42.404Z to 2026-09-10T01:11:53.415Z Record version: sha256:44ef58b559aca5eca07a7cafabe568945642eb3ce3151f3a6914f333e64a7e63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-946: Other Expenses — Financial Services—Investment Companies ### Machine-generated study aids ```json { "summary": "This Subtopic tells investment advisers and mutual fund distributors how to account for costs incurred to distribute fund shares. The general rule: if the adviser does not receive both 12b-1 fees and contingent-deferred sales fees, the distribution/offering costs fail the definition of an asset and must be expensed as incurred (with initial offering costs treated as start-up costs under Subtopic 720-15). Distributors of no-front-end-load mutual funds instead defer and amortize incremental direct costs and expense indirect costs as incurred.", "key_points": [ "The Subtopic has its own discrete scope, separate from the pervasive scope of Section 946-10-15, and applies to all investment advisers and distributors within the scope of either Subtopic 946-10 or Subtopic 940-10 (720-946-15-1 through 15-2).", "Advisers reimbursed through both 12b-1 fees and contingent-deferred sales fees follow paragraph 946-720-25-4 and are outside the scope of 720-946-25-2 through 25-3 (720-946-25-1).", "When an investment adviser does not receive both 12b-1 fees and contingent-deferred sales fees, expected benefits from distribution expenditures do not meet the FASB Concepts Statement No. 6 definition of an asset, so those offering costs are expensed as incurred (720-946-25-2).", "Initial offering costs paid by an adviser that does not receive both fee types are start-up costs accounted for under Subtopic 720-15 (720-946-25-2).", "The expense-as-incurred guidance also applies to Rule 12b-1 distribution plans of open-end investment companies; however, closed-end interval funds and unregistered funds with fees/charges substantially the same as 12b-1 fees and contingent-deferred sales fees must defer and amortize incremental direct costs in a manner similar to 946-720-25-4 (720-946-25-3).", "Distributors of mutual funds without a front-end load defer and amortize incremental direct costs and expense indirect costs when incurred (720-946-25-4).", "Amended guidance effective for periods beginning after December 16, 2024 (public) / December 16, 2025 (nonpublic), with transition guidance in 105-10-65-9, restates the rule as costs incurred in connection with distribution of fund shares being expensed as incurred (720-946-25-2)." ], "categories": [ "Recognition", "Industry-specific", "Subsequent measurement" ], "audience_level": "advanced", "student_note": "The pivot point is whether the adviser receives BOTH 12b-1 fees and contingent-deferred sales fees — only then is deferral and amortization of incremental direct costs appropriate; otherwise everything is expensed as incurred. Students often wrongly assume any fund distribution cost can be capitalized because future fee revenue is expected, but expected benefits alone do not create an asset under Concepts Statement No. 6.", "related_topics": [ "946-720", "720-15", "940-10", "946-10", "105-10" ], "key_concepts": [ "12b-1 fees", "contingent-deferred sales fees", "offering costs", "distribution costs", "incremental direct costs", "start-up costs", "front-end load", "definition of an asset" ] } ``` Source downloaded (UTC): 2026-09-10T01:11:42.404Z to 2026-09-10T01:11:42.404Z Record version: sha256:c301ed192b78d8030d4e29c132bce08f389b6f44a230e5209d2650141ae99a47 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-946-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/946/#00-status) SEC content: no ##### [720-946-00-1](https://asc.understandingaccounting.org/asc/720/946/#720-946-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:42.404Z to 2026-09-10T01:11:42.404Z Record version: sha256:c6d068d0ab7e6f6cd63e48f6c97d79d2c0fb0b7cf20631163bac2cafd13ee475 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
12b-1AddedAccounting Standards Update No. 2014-0905/28/2014
Contingent-Deferred Sales LoadAddedAccounting Standards Update No. 2014-0905/28/2014
Front-End LoadAddedAccounting Standards Update No. 2014-0905/28/2014
Offering CostsAddedAccounting Standards Update No. 2014-0905/28/2014
946-720-05-1AddedAccounting Standards Update No. 2014-0905/28/2014
946-720-15-1AddedAccounting Standards Update No. 2014-0905/28/2014
946-720-15-2AddedAccounting Standards Update No. 2014-0905/28/2014
946-720-25-1 through 25-4
AddedAccounting Standards Update No. 2014-0905/28/2014
946-720-25-2AmendedAccounting Standards Update No. 2024-0203/29/2024
946-720-25-3AmendedAccounting Standards Update No. 2016-2012/21/2016
946-720-25-4AmendedAccounting Standards Update No. 2016-2012/21/2016
Source downloaded (UTC): 2026-09-10T01:11:45.518Z to 2026-09-10T01:11:45.518Z Record version: sha256:d78b91a55289673f9cc04a16c6b28efc54ecebffbc962e857c514e63674375e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-946-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/946/#05-overview-and-background) SEC content: no ##### [720-946-05-1](https://asc.understandingaccounting.org/asc/720/946/#720-946-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:45.518Z to 2026-09-10T01:11:45.518Z Record version: sha256:d5770312eb59c2a1ad9843ce96927761c0e2c4eda4c80b313dc6f5a3874920fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses: 1. a Investment adviser's [offering costs](https://asc.understandingaccounting.org/glossary/o/#offering-costs "Offering costs include all of the following: Legal fees pertaining to the investment company's shares offered for sale Securities and Exchange Commission (SEC)and state registration fees Underwriting and other similar costs Costs of printing prospectuses for sales purposes Initial fees paid to be listed on an exchange Tax opinion costs related to offering of shares Initial agency fees of securing the rating for bonds or preferred stock issued by closed-end funds.") when both [12b-1](https://asc.understandingaccounting.org/glossary/b/#12b-1 "Rule 12b-1 in Chapter 17 of the Code of Federal Regulations is one of the regulations implementing the Investment Company Act of 1940.") fees and [contingent-deferred sales fees](https://asc.understandingaccounting.org/glossary/c/#contingent-deferred-sales-load "A sales charge imposed directly on redeeming shareholders based on a percentage of the lesser of the redemption proceeds or original cost. The percentage may decrease or be eliminated based on the duration of share ownership (frequently decreases by 1 percent a year). Also referred to as back-end load.") are not received 2. b [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). 3. c Distribution costs for mutual funds with no front-end sales fee. Source downloaded (UTC): 2026-09-10T01:11:47.766Z to 2026-09-10T01:11:47.766Z Record version: sha256:c6d8016d53c93eed3fd3a60472d48e911cc1a59a15f1c418a76893269907ad60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-946-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/946/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-946-15-1](https://asc.understandingaccounting.org/asc/720/946/#720-946-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:47.766Z to 2026-09-10T01:11:47.766Z Record version: sha256:634f6dacb6407523aa9a3cfab60b6fd66d6265717c7aaf8ae6de47ca2002f581 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic has its own discrete scope, which is separate and distinct from the pervasive scope for this Topic as outlined in Section 946-10-15. #### Entities ##### [720-946-15-2](https://asc.understandingaccounting.org/asc/720/946/#720-946-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:47.766Z to 2026-09-10T01:11:47.766Z Record version: sha256:fe244b0082dfdc63c878687873592079f917236146ae57bfc2e583bc5ca23a17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all investment advisers and distributors within the scope of either the Overall Subtopic (see Section 946-10-15) or Subtopic 940-10 (see Section 940-10-15). Source downloaded (UTC): 2026-09-10T01:11:53.415Z to 2026-09-10T01:11:53.415Z Record version: sha256:3bdc9e880e586e91e2ff924f7eb52ec16f426635fde3651d04304d681ba3f32b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-946-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/946/#25-recognition) SEC content: no #### Investment Adviser's Offering Costs When both 12b-1 Fees and Contingent-Deferred Sales Fees Are Not Received ##### [720-946-25-1](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:53.415Z to 2026-09-10T01:11:53.415Z Record version: sha256:5f3d6ff4dd949c3a52a30633d9aa0bd4068a4f8dfabfc52a9a2a1313c7c90e3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [946-720-25-4](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-4) provides guidance on accounting by investment advisers who are reimbursed, for [offering costs](https://asc.understandingaccounting.org/glossary/o/#offering-costs "Offering costs include all of the following: Legal fees pertaining to the investment company's shares offered for sale Securities and Exchange Commission (SEC)and state registration fees Underwriting and other similar costs Costs of printing prospectuses for sales purposes Initial fees paid to be listed on an exchange Tax opinion costs related to offering of shares Initial agency fees of securing the rating for bonds or preferred stock issued by closed-end funds.") paid, through both [12b-1](https://asc.understandingaccounting.org/glossary/b/#12b-1 "Rule 12b-1 in Chapter 17 of the Code of Federal Regulations is one of the regulations implementing the Investment Company Act of 1940.") fees and [contingent-deferred sales fees](https://asc.understandingaccounting.org/glossary/c/#contingent-deferred-sales-load "A sales charge imposed directly on redeeming shareholders based on a percentage of the lesser of the redemption proceeds or original cost. The percentage may decrease or be eliminated based on the duration of share ownership (frequently decreases by 1 percent a year). Also referred to as back-end load."). Accordingly, the accounting by those investment advisers for offering costs are outside the scope of the guidance in paragraphs [946-720-25-2 through 25-3](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-2) . ##### [720-946-25-2](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:11:53.415Z to 2026-09-10T01:11:53.415Z Record version: sha256:7fcc2cf4f47c65b27a15de714239b6cc7aef464e098d6443ea4427a0c93067f8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Benefits expected from the expenditures paid by an investment adviser in connection with the distribution of shares of a fund in circumstances in which the investment adviser does not receive both 12b-1 fees and contingent-deferred sales fees do not meet the definition of an asset of the investment adviser as provided in FASB Concepts Statement No. 6, Elements of Financial Statements. Accordingly, such offering costs paid by the investment adviser shall be expensed as incurred. Initial offering costs paid by an investment adviser that does not receive both 12b-1 fees and contingent-deferred sales fees are start-up costs of the investment adviser, which should be accounted for in accordance with Subtopic 720-15. Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9) Costs incurred by an investment adviser in connection with the distribution of shares of a fund in circumstances in which the investment adviser does not receive both 12b-1 fees and contingent-deferred sales fees shall be expensed as incurred. Initial offering costs paid by an investment adviser that does not receive both 12b-1 fees and contingent-deferred sales fees are start-up costs of the investment adviser, which should be accounted for in accordance with Subtopic 720-15. #### Distribution Costs for Funds ##### [720-946-25-3](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:53.415Z to 2026-09-10T01:11:53.415Z Record version: sha256:daf16ecc55eb9881b114b2acfd21dc0127ff658fb4ad5e207f3967ae81c031b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraph [946-720-25-2](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-2) applies also to distribution plans of open-end investment companies permitted under Rule 12b-1. Some closed-end interval funds incur distribution-related fees (similar to 12b-1 fees) and impose early withdrawal charges (similar to contingent-deferred sales fees) pursuant to exemptive orders issued under the Investment Company Act of 1940. In addition, certain funds not subject to regulation under the Investment Company Act of 1940 also may incur fees and impose charges that are substantially the same as 12b-1 fees and contingent-deferred sales fees, respectively. In those instances, an entity shall defer and amortize the incremental direct costs and shall account for offering costs incurred for distribution of those funds in a manner similar to the accounting specified in paragraph [946-720-25-4](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-4). ##### [720-946-25-4](https://asc.understandingaccounting.org/asc/720/946/#720-946-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:53.415Z to 2026-09-10T01:11:53.415Z Record version: sha256:eef592665f6aab22db7c82cace7dbb36ea992bb579d36535773f636dba3df62f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Distributors of mutual funds that do not have a [front-end load](https://asc.understandingaccounting.org/glossary/f/#front-end-load "A sales commission or charge payable at the time of purchase of mutual fund shares.") shall defer and amortize the incremental direct costs and shall expense the indirect costs when incurred.