# ASC Topic 720: Other Expenses Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/) 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): 2026-09-10T00:48:39.704Z to 2026-09-10T01:14:26.123Z Record version: sha256:11c2deda956f2db85ff0707ebbb6d57c479ebabbfb539d21f32b58e2a5953fe0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 720 is a residual "Other Expenses" Topic that gathers unrelated cost categories not covered elsewhere in GAAP; 720-10-05-2 stresses that each subtopic is standalone, so guidance cannot be analogized from one to another. The dominant theme running through the general subtopics is expense-as-incurred: start-up and organization costs (720-15-25-1), advertising (720-35-25-1, either as incurred or the first time the advertising takes place), business process reengineering (720-45-25-1), and contributions made measured at the fair value of assets given (720-25-25-1, 720-25-30-1); exceptions with special timing include property taxes accrued monthly over the taxing authority's fiscal period (720-30-25-7), purchased retroactive/claims-made and multiple-year retrospectively rated insurance (720-20), WEEE historical waste liabilities recognized only over the measurement period (720-40-25-1), and ACA annual fees recognized in full at the first qualifying event with a deferred cost amortized over the calendar year (720-50-25-1). Industry subtopics (720-908 airlines, 720-922 cable, 720-924 casinos, 720-926 films, 720-928 music, 720-932 oil and gas, 720-942 depository institutions, 720-946/940 fund distribution, 720-948 mortgage banking, 720-954 health care, 720-958 not-for-profit functional expense reporting and joint costs, 720-970/972/974/978 real estate and time-share) mostly identify particular costs that fail the definition of an asset and must be charged to expense. The key takeaway: absent a specific rule permitting capitalization, these miscellaneous costs are period costs, and the analysis is always subtopic-specific. Source downloaded (UTC): 2026-09-10T01:06:55.927Z to 2026-09-10T01:06:55.927Z Record version: sha256:ceacbeb3de48cc674a1460a85fba633eb5a2fa94c0b2251954e4f96dd06016cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-10: Other Expenses — Overall ### Machine-generated study aids ```json { "summary": "ASC 720-10 is the Overall subtopic of the Other Expenses Topic, which is essentially an organizing shell. It lists the eight subtopics housed under Topic 720 — Overall, Start-Up Costs, Insurance Costs, Contributions Made, Real and Personal Property Taxes, Advertising Costs, Electronic Equipment Waste Obligations, and Business and Technology Reengineering — and states that each contains standalone guidance with no interrelationship among them.", "key_points": [ "Topic 720 collects guidance on miscellaneous expenses and costs not addressed in other Topics, organized into eight subtopics listed at 720-10-05-1.", "The subtopics are Overall (720-10), Start-Up Costs (720-15), Insurance Costs (720-20), Contributions Made (720-25), Real and Personal Property Taxes (720-30), Advertising Costs (720-35), Electronic Equipment Waste Obligations (720-40), and Business and Technology Reengineering (720-45).", "Per 720-10-05-2, each Subtopic contains standalone guidance and there is no relationship between the individual Subtopics within the Topic.", "Because the subtopics are independent, guidance or analogies from one 720 subtopic should not be applied to another type of cost covered by a different subtopic.", "720-10 Overall itself supplies no recognition or measurement rules; the substantive accounting and reporting requirements reside in the specific cost subtopics." ], "categories": [ "Recognition", "Presentation", "Financial statement presentation" ], "audience_level": "introductory", "student_note": "Treat 720-10 as a table of contents, not a source of rules — the testable content is in the individual subtopics (e.g., expensing start-up costs under 720-15, contributions made under 720-25). The common mistake is assuming the 720 subtopics form a coherent framework and reasoning by analogy across them, which 720-10-05-2 expressly forecloses.", "related_topics": [ "720-15", "720-20", "720-25", "720-30", "720-35", "720-45" ], "key_concepts": [ "other expenses", "start-up costs", "insurance costs", "contributions made", "property taxes", "advertising costs", "electronic equipment waste obligations", "business and technology reengineering" ] } ``` Source downloaded (UTC): 2026-09-10T01:06:55.927Z to 2026-09-10T01:06:55.927Z Record version: sha256:1dd6fc3db5483e0dae40eb0f2cf9277a40b3d10379b8d454a2e2365fd5caade8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/10/#05-overview-and-background) SEC content: no ##### [720-10-05-1](https://asc.understandingaccounting.org/asc/720/10/#720-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:06:55.927Z to 2026-09-10T01:06:55.927Z Record version: sha256:4af599e216e13cb4097c8e06718ec623cbe43480467ffe341135532871953307 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Other Expenses Topic includes the following Subtopics: 1. a Overall 2. b Start-Up Costs 3. c Insurance Costs 4. d Contributions Made 5. e Real and Personal Property Taxes 6. f Advertising Costs 7. g Electronic Equipment Waste Obligations 8. h Business and Technology Reengineering. ##### [720-10-05-2](https://asc.understandingaccounting.org/asc/720/10/#720-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:06:55.927Z to 2026-09-10T01:06:55.927Z Record version: sha256:638c0086287abe12915253fc6c545f6bea478f73d96e294df9a553624d69f7ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Each Subtopic in the Other Expenses Topic contains standalone guidance; there is no relationship between the individual Subtopics within this Topic. Each Subtopic provides accounting and reporting guidance for the specific type of costs and expenses as indicated by the Subtopic title. Source downloaded (UTC): 2026-09-10T01:06:59.231Z to 2026-09-10T01:07:15.369Z Record version: sha256:1f2414b3f9d6ebbb1204c58a75682e4b9ab184b979bbb79adc0457bc390798a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-15: Other Expenses — Start-Up Costs ### Machine-generated study aids ```json { "summary": "ASC 720-15 governs the accounting for start-up activities — including one-time activities to open a new facility, introduce a new product or service, conduct business in a new territory or with a new class of customer, initiate a new process in an existing facility, or organize a new entity (organization costs). The single core rule is that costs of start-up activities, including organization costs, must be expensed as incurred (720-15-25-1). The Subtopic defines start-up activities by their nature rather than by the time period in which they occur, and carves out numerous costs governed by other GAAP.", "key_points": [ "Costs of start-up activities, including organization costs, shall be expensed as incurred (720-15-25-1); no capitalization or deferral is permitted.", "The Subtopic applies to all nongovernmental entities, including not-for-profit entities (720-15-15-1), and start-up activities are identified by the nature of the activity, not the time period in which it occurs (720-15-15-2).", "Terms such as preopening costs, preoperating costs, and organization costs are all treated as start-up costs under this Subtopic (720-15-15-3).", "Excluded from scope are, among others, ongoing customer acquisition and loan origination costs, merger/acquisition activities, business process reengineering (720-45), costs of acquiring or constructing long-lived assets, inventory costs, intangible asset acquisition costs, internally developed assets such as internal-use software, R&D under 730-10-15, regulatory costs under 980-10-15, NFP fundraising, capital-raising, advertising, and contract-related learning and acquisition costs under 340-40 (720-15-15-4).", "Although the cost of acquiring long-lived, intangible, and internally developed assets is outside the scope, the cost of using those assets that is allocated to start-up activities (for example, depreciation of computers or amortization of a purchased patent) is within the scope and expensed (720-15-15-4(f), (h), (i)).", "Excluded costs are not automatically capitalizable; they are capitalized only if they qualify under other GAAP (720-15-55-1).", "Illustrative in-scope costs include feasibility study and consulting costs, employee recruiting and training, salary-related costs, post-construction security/property taxes/insurance/utilities, and nonrecurring operating losses (720-15-55-3, 55-6, 55-9)." ], "categories": [ "Recognition", "Initial measurement", "Not-for-profit" ], "audience_level": "introductory", "student_note": "The rule itself is one sentence — expense start-up costs as incurred — so exam questions almost always test scope: distinguishing preopening/training/feasibility costs (expensed) from long-lived asset, inventory, software, and advertising costs (governed elsewhere). The common misunderstanding is assuming that anything excluded from 720-15 may be capitalized; 720-15-55-1 says such costs are capitalized only if other GAAP allows it.", "related_topics": [ "340-40", "720-45", "730-10", "958-720", "350-40", "835-30" ], "key_concepts": [ "start-up costs", "organization costs", "preopening costs", "expense as incurred", "nonrecurring operating losses", "scope exceptions", "not-for-profit entities", "allocated depreciation and amortization" ] } ``` Source downloaded (UTC): 2026-09-10T01:06:59.231Z to 2026-09-10T01:06:59.231Z Record version: sha256:1b4a9d0d854cb3a8fed3a6f0a8b5398cb81ac2078b227e4d3d49f9dd3821dbbf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-15-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/15/#00-status) SEC content: no ##### [720-15-00-1](https://asc.understandingaccounting.org/asc/720/15/#720-15-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:06:59.231Z to 2026-09-10T01:06:59.231Z Record version: sha256:02c2d61294ded775a9fff10138724500118c24b5bd323888ad15b1ff822762ff 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
ContractAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
720-15-15-1AmendedAccounting Standards Update No. 2014-1006/10/2014
720-15-15-4AmendedAccounting Standards Update No. 2014-0905/28/2014
720-15-55-7AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:07:02.296Z to 2026-09-10T01:07:02.296Z Record version: sha256:a5e071b4890a2a6aacb80b11c3dd17538dbeb48908aa985097f2a0246789df27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-15-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/15/#05-overview-and-background) SEC content: no ##### [720-15-05-1](https://asc.understandingaccounting.org/asc/720/15/#720-15-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:02.296Z to 2026-09-10T01:07:02.296Z Record version: sha256:52265d3c13120a59a6810d6f2360e7b6ecf99df3dca5ec8f34d673872bdf7b76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on the financial reporting of start-up and organization costs. This Subtopic defines [start-up activities](https://asc.understandingaccounting.org/glossary/s/#start-up-activities "Defined broadly as those one-time activities related to any of the following: Opening a new facility Introducing a new product or service Conducting business in a new territory Conducting business with an entirely new class of customers (for example, a manufacturer who does all of its business with retailers attempts to sell merchandise directly to the public) or beneficiary Initiating a new process in an existing facility Commencing some new operation.") and provides Examples to help entities determine which costs fall within the scope and outside the scope of this Subtopic. Source downloaded (UTC): 2026-09-10T01:07:05.683Z to 2026-09-10T01:07:05.683Z Record version: sha256:22a928a8cd4003f0580675788bfb68ee50c50e27da6e6b9b8082855c62435ac5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-15-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/15/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [720-15-15-1](https://asc.understandingaccounting.org/asc/720/15/#720-15-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:05.683Z to 2026-09-10T01:07:05.683Z Record version: sha256:a46bac5faaaf0dace4a70cb07ff7467a66d1fc50e37021bdcf516abc3b3652d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all nongovernmental entities, including not-for-profit entities (NFPs). 1. a [Subparagraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). #### Transactions ##### [720-15-15-2](https://asc.understandingaccounting.org/asc/720/15/#720-15-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:05.683Z to 2026-09-10T01:07:05.683Z Record version: sha256:d67fc36f3e923a223cbdbdbe7692869c012ddd004e16262b7bb01b6af78d9be3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to [start-up activities](https://asc.understandingaccounting.org/glossary/s/#start-up-activities "Defined broadly as those one-time activities related to any of the following: Opening a new facility Introducing a new product or service Conducting business in a new territory Conducting business with an entirely new class of customers (for example, a manufacturer who does all of its business with retailers attempts to sell merchandise directly to the public) or beneficiary Initiating a new process in an existing facility Commencing some new operation."). The definition of start-up activities is based on the nature of the activities and not the time period in which they occur. Start-up activities include activities related to organizing a new entity (commonly referred to as organization costs). ##### [720-15-15-3](https://asc.understandingaccounting.org/asc/720/15/#720-15-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:05.683Z to 2026-09-10T01:07:05.683Z Record version: sha256:7156e9a6387f775f33be3af3a6febae9a8470c7ae5707a3d36fb7d2bdaa90e64 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Various terms are used to refer to start-up costs, such as preopening costs, preoperating costs, and organization costs. For purposes of this Subtopic, these costs are referred to as start-up costs. ##### [720-15-15-4](https://asc.understandingaccounting.org/asc/720/15/#720-15-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:05.683Z to 2026-09-10T01:07:05.683Z Record version: sha256:fbef4098474620580a3ba426819b445ecfc1ac23674626ee7b5a11cf3f760fec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Certain costs that may be incurred in conjunction with start-up activities are outside the scope of this Subtopic. Such costs should be accounted for in accordance with other existing authoritative accounting literature. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Ongoing customer acquisition costs, such as policy acquisition costs (see Subtopic 944-30) 2. b Loan origination costs (see Subtopic 310-20) 3. c Activities related to routine, ongoing efforts to refine, enrich, or otherwise improve upon the qualities of an existing product, service, process, or facility 4. d Activities related to mergers or acquisitions 5. e Business process reengineering and information technology transformation costs addressed in Subtopic 720-45 6. f Costs of acquiring or constructing long-lived assets and getting them ready for their intended uses (however, the costs of using long-lived assets that are allocated to start-up activities \[for example, depreciation of computers\] are within the scope of this Subtopic) 7. g Costs of acquiring or producing inventory 8. h Costs of acquiring intangible assets (however, the costs of using intangible assets that are allocated to start-up activities \[for example, amortization of a purchased patent\] are within the scope of this Subtopic) 9. i Costs related to internally developed assets (for example, internal-use computer software costs) (however, the costs of using those assets that are allocated to start-up activities are within the scope of this Subtopic) 10. j Research and development costs that are within the scope of Section 730-10-15 11. k Regulatory costs that are within the scope of Section 980-10-15 12. l Costs of fundraising incurred by NFPs 13. m Costs of raising capital 14. n Costs of advertising 15. o Learning or start-up costs incurred in connection with existing [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") and in anticipation of follow-on or future contracts for the same goods or services (see Subtopic 340-40 on other assets and deferred costs). 16. p Costs incurred in connection with acquiring a contract with a customer (see Subtopic 340-40). ##### [720-15-15-5](https://asc.understandingaccounting.org/asc/720/15/#720-15-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:05.683Z to 2026-09-10T01:07:05.683Z Record version: sha256:11e6aedc5da0547102e177a99d45ba10af84e8213d114a2791c9fa356772860c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 720-15-55 provides Examples of costs that are within the scope and outside the scope of this Subtopic. Source downloaded (UTC): 2026-09-10T01:07:11.822Z to 2026-09-10T01:07:11.822Z Record version: sha256:0277c7c5491741b3a94a70cef3cc9312e0921dda3d08f3acbaf79e618e38abe9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-15-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/15/#25-recognition) SEC content: no ##### [720-15-25-1](https://asc.understandingaccounting.org/asc/720/15/#720-15-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:11.822Z to 2026-09-10T01:07:11.822Z Record version: sha256:b55fc14bb28da79ce0110b0cced4f253774988b82816da6412d12e9c19218408 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of [start-up activities](https://asc.understandingaccounting.org/glossary/s/#start-up-activities "Defined broadly as those one-time activities related to any of the following: Opening a new facility Introducing a new product or service Conducting business in a new territory Conducting business with an entirely new class of customers (for example, a manufacturer who does all of its business with retailers attempts to sell merchandise directly to the public) or beneficiary Initiating a new process in an existing facility Commencing some new operation."), including organization costs, shall be expensed as incurred. Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:be194512c019dc97525d17e51d88b4fe5d8757123b2b4ff18b373e8531c7e68d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-15-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/15/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [720-15-55-1](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:398e22b071a1f623d824c27f42d5a85b77da1867c0fc841a3740abb1aa2b1856 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting for certain costs incurred in conjunction with [start-up activities](https://asc.understandingaccounting.org/glossary/s/#start-up-activities "Defined broadly as those one-time activities related to any of the following: Opening a new facility Introducing a new product or service Conducting business in a new territory Conducting business with an entirely new class of customers (for example, a manufacturer who does all of its business with retailers attempts to sell merchandise directly to the public) or beneficiary Initiating a new process in an existing facility Commencing some new operation.") are not covered by this Subtopic. An entity should not conclude that costs outside the scope of this Subtopic are to be capitalized. Such costs shall be capitalized if they qualify for capitalization under other generally accepted accounting principles (GAAP). #### Illustrations ##### [720-15-55-2](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:8ae7c846cb517f1e842abb5921c0ecd4fac0ad80b2b6c933caafbca13e4fdd23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates application of the guidance in Section 720-15-15. ##### [720-15-55-3](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:c5857cc900ee665a681bf78309af0edf95c33dabe13a38df857f9604a49b457a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A major U.S. beverage entity begins construction of a new plant in China. This represents the entity's initial entry into the Chinese market. As part of the overall strategy, the entity plans to introduce into China, on a locally produced basis, its major U.S. beverage brands. The following costs that might be incurred in conjunction with start-up activities are subject to the provisions of this Subtopic: 1. a Travel costs, employee salary-related costs, and consulting costs related to feasibility studies, accounting, legal, tax, and governmental affairs 2. b Training of local employees related to production, maintenance, computer systems, engineering, finance, and operations 3. c Recruiting, organization, and training related to establishing a distribution network 4. d Nonrecurring operating losses 5. e Depreciation, if any, of new computer data terminals and other communication devices. ##### [720-15-55-4](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:91d4c3cfb8064484eae225a423c150a078a6a345a5a07449558d3a79cb06efc1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following costs that might be incurred in conjunction with start-up activities are outside the scope of this Subtopic: 1. a Costs of long-lived asset additions, such as the new plant, production equipment, and packaging lines 2. b Internal-use computer software systems development costs 3. c Costs that are capitalizable as inventory 4. d Deferred financing costs. ##### [720-15-55-5](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:1ad264068c75516b043bbde9f1c80dbb445232c4bb6f12cfd17801180e36e70a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates application of the guidance in Section 720-15-15. ##### [720-15-55-6](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:f924f7976a4137bf95e61217ec099839ed77490761262d410c578c400b221180 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A retail chain is constructing and opening two new stores. One will open in a territory in which the entity already has three stores operating. The other will open in a territory new to the entity. (Costs related to both openings are treated the same for purposes of this Subtopic.) All of the stores provide the same products and services. The following costs that might be incurred in conjunction with start-up activities are subject to the provisions of this Subtopic: 1. a Salary-related expenses for new employees 2. b Salary-related expenses for the management store opening team 3. c Training costs and meals for newly hired employees 4. d Hotel charges, meals, and transportation for the opening team 5. e Security, property taxes, insurance, and utilities costs incurred after construction is completed 6. f Depreciation, if any, of new computer data terminals and other communication devices 7. g Nonrecurring operating losses. ##### [720-15-55-7](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:312cefbe4f3b86166915c0b74d5cfa10b791a85ff66d5f5dc8df5cc1c393ab60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following costs that might be incurred in conjunction with start-up activities are outside the scope of this Subtopic: 1. a Store advertising costs 2. b Coupon giveaways within the scope of Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") (see paragraphs [606-10-32-25 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25) for guidance on consideration payable to a customer) 3. c Costs of uniforms 4. d Costs of furniture and cash registers 5. e Costs to obtain licenses, if any 6. f Security, property taxes, insurance, and utilities costs related to construction activities 7. g Deferred financing costs (see Subtopic 835-30). ##### [720-15-55-8](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:e9521e1cf93371bede704a0133adbdea5b73a5d096ff597f4a6287e4f83f6284 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates application of the guidance in Section 720-15-15. ##### [720-15-55-9](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:ad2dbb9b2c2c9c1ca3d3f7cda971d959a1c1df3933f4cc435f8c052dc8f0c4c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A not-for-profit entity (NFP) that provides meals to the homeless is opening a shelter to house the homeless. The entity will rent the facility. This will be its first shelter and it will conduct a fundraising campaign to raise money to start up the shelter. The entity will lease space for the shelter and will incur capital expenditures for leasehold improvements and furniture. The entity expects that it will require three months to set up the space for the shelter. The entity will hire a security firm to secure the premises during the three-month period in which the shelter is built. The following costs that might be incurred in conjunction with start-up activities are subject to the provisions of this Subtopic: 1. a Employee salary-related costs related to needs and feasibility studies 2. b Staff recruiting and training 3. c Rent, security, insurance, and utilities 4. d Consultant fees for developing policies and procedures for operating the shelter 5. e Amortization and depreciation, if any, of leasehold improvements and furniture 6. f Costs of social workers. ##### [720-15-55-10](https://asc.understandingaccounting.org/asc/720/15/#720-15-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:15.369Z to 2026-09-10T01:07:15.369Z Record version: sha256:1e1e195c894762cce983072b16722b004526301cc1e25bb5b61b6fd96de1e175 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following costs that might be incurred in conjunction with start-up activities are outside the scope of this Subtopic (see Subtopic 958-720): 1. a Costs of fund-raising 2. b Costs of leasehold improvements and furniture 3. c Architect fees for the leasehold improvements 4. d Advertising costs to publicize the shelter. Source downloaded (UTC): 2026-09-10T01:07:18.243Z to 2026-09-10T01:07:45.379Z Record version: sha256:7ade7bff5a158a547fc71757c456a7cfeb025beec76a30bebe401ace04e11bcb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20: Other Expenses — Insurance Costs ### Machine-generated study aids ```json { "summary": "ASC 720-20 tells a policyholder (a noninsurance entity, or an insurer buying coverage outside its core operations) how to account for insurance it purchases, covering three contract types: retroactive contracts, claims-made contracts, and multiple-year retrospectively rated contracts. If a contract does not actually transfer insurance risk, the premium (less amounts retained by the insurer) is accounted for as a deposit under Subtopic 340-30 (720-20-25-1). For retroactive coverage of already-incurred liabilities, the premium is expensed immediately, a receivable is recorded for expected recoveries, and any excess of receivable over premium is a deferred gain amortized over the recovery period (720-20-25-3 through 25-4; 720-20-35-2).", "key_points": [ "If, regardless of form, an insurance contract does not indemnify the insured against loss or liability, the premium paid less the amount retained by the insurer is accounted for as a deposit under Subtopic 340-30 (720-20-25-1; 720-20-25-2).", "Purchased retroactive insurance is accounted for like retroactive reinsurance under Subtopic 944-605: the premium is expensed immediately and a receivable is established for expected recoveries related to the insured event (720-20-25-3).", "Any excess of the receivable over the amount paid is a deferred gain—immediate gain recognition and derecognition of the liability are prohibited because the liability is not extinguished and offsetting is not permitted under 210-20-45-1 (720-20-25-4); the deferred gain is amortized using the interest method, or on a recoveries-to-total-recoveries basis if amounts and timing cannot be reasonably estimated (720-20-35-2).", "A claims-made policy that covers specific known claims reportable before the policy period (asserted claims, known unasserted claims, or known events that might result in a claim) contains a retroactive provision; the retroactive and prospective provisions must be accounted for separately if practicable, and if not practicable the entire policy is accounted for as retroactive (720-20-25-6 through 25-8), with indicators of a purely prospective policy listed in 720-20-25-10.", "Prospective claims-made policies are accounted for by recognizing the premium as prepaid expense and estimating an annual expense equal to premium plus the change in the incurred-but-not-reported liability and the change in the related insurance recoverable, allocated to interim periods, with unusual claims recognized discretely when incurred (720-20-35-3 through 35-5; 720-20-35-9 through 35-10).", "Insured entities must still accrue a liability for probable and reasonably estimable incurred but not reported claims under 450-20-25-2 (720-20-25-14), and prepaid insurance and insurance receivables may not be offset against those liabilities unless 210-20-45-1 is met (720-20-45-1).", "For a multiple-year retrospectively rated contract accounted for as insurance, the insured recognizes a liability (or asset) for consideration payable to (or by) the insurer that would not exist absent experience under the contract, measured using a with-and-without method excluding future experience (720-20-25-15; 720-20-30-3; termination alternatives in 720-20-30-4)." ], "categories": [ "Recognition", "Subsequent measurement", "Presentation", "Contingencies and guarantees" ], "audience_level": "intermediate", "student_note": "This is the policyholder's side of insurance accounting—easy to confuse with Topic 944, which governs insurers. The classic trap is assuming that buying insurance for an already-recognized liability lets you write off the liability and book a gain; instead you expense the premium, record a receivable, defer any gain, and keep the gross liability on the balance sheet.", "related_topics": [ "340-30", "944-605", "944-20", "450-20", "410-30", "210-20" ], "key_concepts": [ "retroactive insurance contract", "claims-made policy", "deferred gain amortization", "deposit accounting", "incurred but not reported liability", "insurance recoverable", "multiple-year retrospectively rated contract", "with-and-without method" ] } ``` Source downloaded (UTC): 2026-09-10T01:07:18.243Z to 2026-09-10T01:07:18.243Z Record version: sha256:ffda97179e020b5e63aa6aac80d9c1f5cde9f597e315627317d0b1a10382d126 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/20/#00-status) SEC content: no ##### [720-20-00-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:18.243Z to 2026-09-10T01:07:18.243Z Record version: sha256:04644f1c25cc4d2820357cb1683aa4b6cc61e089c45917f18c58ac3e912efb08 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
ReinsuranceAddedAccounting Standards Update No. 2016-1912/14/2016
720-20-05-3AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-05-5AmendedMaintenance Update 2020-18 (PDF)11/25/2020
720-20-15-6AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-15-8AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-25-1AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-30-2AmendedMaintenance Update 2020-18 (PDF)11/25/2020
Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:ba7f18a3047d63ec71e9fb0dcb664d4604e9b6853d370fbd65fbed76be750a1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/20/#05-overview-and-background) SEC content: no ##### [720-20-05-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:c3c39e33ff8cae5a2b83b268dae1f9f60c475d312cbc68001b6401c24937f34a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on three types of insurance contracts. The guidance for each is presented in the following Subsections: 1. a Retroactive contracts 2. b Claims-made contracts 3. c Multiple-year retrospectively rated contracts. ##### [720-20-05-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:2ab80a83aef1f197ce3912b92186fa45da7ee2b4cedabee0b620f80d9abfcb78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, guidance on deposit accounting resulting from contracts that do not transfer insurance risk is contained in the General Subsections of this Subtopic and in Subtopic 340-30. Operations in certain industries may be subject to such high risks that insurance is unavailable or is available only at what is considered to be a prohibitively high cost. Some entities in those industries have pooled their risks by forming mutual insurance entities in which they retain an equity interest and to which they pay insurance premiums. For example, some electric utility entities have formed such a mutual insurance entity to insure risks related to nuclear power plants, and some oil entities have formed an entity to insure against risks associated with petroleum exploration and production. Whether the premium paid represents a payment for the transfer of risk or whether it represents merely a deposit will depend on the circumstances surrounding each entity's interest in and insurance arrangement with the mutual insurance entity. An analysis of the contract is required to determine whether risk has been transferred and to what extent. ### Retroactive Contracts ##### [720-20-05-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:3bae801406e6e6ab95294d3bb2b4cda2cd49fe9cdd56d6a02474c6dfb5d383ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Retroactive Contracts Subsections provide guidance on how an insured entity, including an insurance entity purchasing insurance unrelated to its core insurance operations (for example, manufacturers, retailers, service entities, and financial institutions), should account for a purchased retroactive insurance policy and whether the transaction results in gain recognition (excluding [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") transactions). For example, an entity records a liability of $100 million incurred as a result of a past event in accordance with Subtopic 450-20. The entity then buys an insurance policy for $60 million to cover that liability. ### Claims-Made Contracts ##### [720-20-05-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:3365f1ecdb2192b767248358b01fc5b3479a3ebcd9c1fd7cf3a41569a3ffdce8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many entities use claims-made policies to satisfy their insurance needs for such coverage as product, directors and officers, and malpractice liabilities. However, entities have been purchasing coverage for a variety of other exposures using a claims-made format. Under a claims-made insurance policy, an entity is insured for any claims reported during the term of the policy, in many cases including those that occurred prior to the policy effective date but after the specified retroactive date. ##### [720-20-05-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:a2743596df59f822750b39902b4469bd80b4c2f61e1085f454cd3ff1497b28d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Generally, entities purchasing a claims-made policy will renew the policy each year. The amount of coverage purchased may change over time to meet current needs (for example, changing risk within the entity) or to respond to the overall environment (for example, the expected settlement costs of the same claim today may cost more than in prior years). When operations cease, the entity generally purchases [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") to insure itself against any previously unasserted claims. ##### [720-20-05-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:91f83dd4ddecc2c82ccb548d2899b7b2451984936b5fe1be9e8917be42ba9312 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Presuming the entity can renew the claims-made policy each year and can obtain tail coverage when desired, such a strategy effectively converts the claims-made policy into an occurrence-based policy covering the entity for any claims made against it. ##### [720-20-05-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:c910907d5b5143186816f7affbb10d404f27e0043d0709a52fba0bfed88e3422 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities generally use claims-made coverage because it is the only form of insurance available for certain exposures, particularly exposures for which the occurrence dates may be difficult to determine or for which the occurrence may span a long period of time. Therefore, a claims-made policy mitigates potential coverage disputes because the occurrence date generally is not relevant to the determination of coverage. ##### [720-20-05-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:9f562e7ea0d9fe10e0512449ec9789396441908ebedd0638f5375aa753bd8621 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Also, there may be reduced insurance costs in the first several years of a claims-made policy as compared to an occurrence-based policy. Many entities that purchase claims-made insurance policies have no knowledge of unasserted outstanding claims or, because their liabilities have not met the recognition criteria contained in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) or in other applicable U.S. generally accepted accounting principles (GAAP), have no recognized liability for claims, including [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") claims. In other situations, however, entities that purchase claims-made insurance policies are aware of potential claims based on a specific incident or incidents or historical experience. In those situations, unasserted claims can be either specifically excluded from or specifically included in the coverage. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-05-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:9a1387fd8b1da809c00f94d4d1eaaf82252428ca4101741a17df3272ebd6b25f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity (for example, a manufacturer, a retailer, a service entity, or a financial entity) may enter into a multiple-year retrospectively rated contract with an insurance entity. These contracts may cover various types of exposures such as product and environmental liability risks. A critical feature of these contracts is that part or all of the retrospective rating provision is obligatory such that the retrospective rating provision creates for each party to the contract future rights and obligations as a result of past events. ##### [720-20-05-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:be692a0677c725b48ec5c22442ff3100ade6bdeadc779e9281455c0904d4b49d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Such contracts include a retrospective rating provision that provides for any of the following based on contract experience: 1. a Changes in the amount or timing of future contractual cash flows, including premium adjustments, settlement adjustments, or refunds to the noninsurance entity 2. b Changes in the contract's future coverage. Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:bc61da2cecd989664a5fbaf3d83083ae57d319e6a4fa012cd2f6687f5cb52849 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/20/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:b09d24d4d06f40716d2087b5f785c5d65e449098dc0087daf9656de1b7f56720 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsection of this Section establishes the pervasive scope for this Subtopic, with specific exceptions noted in the other Subsections of this Section. #### Entities ##### [720-20-15-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:f2d09d8c7c9c82f2244abf222b643204d2ffbbe01f75a983ede73aba974ba908 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. ### Retroactive Contracts #### Overall Guidance ##### [720-20-15-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:aa42395ae7f26b9988df19c7594e049a7723e44a6a59d37e198d01e48346faa2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Retroactive Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1), with specific entity and transaction qualifications noted below. #### Entities ##### [720-20-15-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:a4ab70952e208333930bc6079794a8df9c6d608ba526188019ec52541637a26e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Retroactive Contracts Subsections applies to all entities that enter into retroactive insurance contracts. #### Transactions ##### [720-20-15-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:16f0cb07f67b1dd70a069e301a834f93382140e0d4973587ad84ba9c7baf9de6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Retroactive Contracts Subsections applies to the following transactions and activities: 1. a Those that meet the indemnification against loss or liability conditions of Section [720-20-25-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-1) 2. b Those that provide indemnification against loss or liability relating to liabilities that have been incurred as a result of a past event, for example, environmental remediation liabilities (see Subtopic 410-30). ##### [720-20-15-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:17e71650a96739e5c6922aed4b6423941826b1ca49d35f4c3216ae1dcd8987f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Retroactive Contracts Subsections does not apply to the following transactions and activities: 1. a Those that legally extinguish the entity's liability 2. b [Reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") transactions (see Subtopic 944-20 for guidance on the accounting by insurance entities for reinsurance contracts). ### Claims-Made Contracts #### Overall Guidance ##### [720-20-15-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:8789686d28516e1c940f21a4c08fcbf75bfdf4141466c10efd77e24a48e54000 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Claims-Made Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1), with specific transaction exceptions noted below. #### Transactions ##### [720-20-15-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:66a9581ac02a381ccba6b484408dc843ed10a8bd5352efaf0f4f66bd2aeaeb3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Claims-Made Contracts Subsections does not apply to [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") transactions (see the Reinsurance Subsections of Topic 944 for guidance on the accounting by insurance entities for reinsurance contracts). ### Multiple-Year Retrospectively Rated Contracts #### Overall Guidance ##### [720-20-15-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:ea53a2375880cd06556ec2e139a409ed9c96493d06abaef7f465add03b085b51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Multiple-Year Retrospectively Rated Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1), with specific transaction exceptions noted below. #### Transactions ##### [720-20-15-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:07b75bdd1d182a0f2c0422d726205626ff6399b59969904dd14f53e86960bda8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Multiple-Year Retrospectively Rated Contracts Subsections does not apply to the following transactions and activities: 1. a A retrospectively rated insurance contract that is not a multiple-year contract or that could be cancelled by either party without further obligation. Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:eb70b47ccbe1892880dd74d8d77caaa92ff7af38d756cd7e21aa4fb188eb5c48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/20/#25-recognition) SEC content: no ##### [720-20-25-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:0b5d129b06bb71e968bb08b93d7737dd511a38cfeec0ba46e389a8a0298c8e70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent that an insurance contract or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract does not, despite its form, provide for indemnification of the insured or the ceding entity by the insurer or reinsurer against loss or liability, the premium paid less the amount of the premium to be retained by the insurer or reinsurer shall be accounted for as a deposit by the insured or the ceding entity. Those contracts may be structured in various ways, but if, regardless of form, their substance is that all or part of the premium paid by the insured or the ceding entity is a deposit, it shall be accounted for as such. ##### [720-20-25-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:eaa32987671a42b18a78e406f0ee110dc5104d8c1a7945039a6488beea61c78b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 for guidance on deposit accounting. In addition, the preceding paragraph requires that an entity determine whether insurance risk has been transferred through an insurance contract; entities may find the conditions in Section 944-20-15 useful in assessing whether an insurance contract transfers risk. ### Retroactive Contracts #### Purchase of a Retroactive Insurance Policy ##### [720-20-25-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:28eab03aad6670a77070d7cf4ecb8554b6f3b07cbd35ee686f4c66b58f28c3eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding that Topic 944 applies only to insurance entities, purchased retroactive insurance contracts that indemnify the insured shall be accounted for in a manner similar to the manner in which retroactive reinsurance contracts are accounted for under Subtopic 944-605. The guidance in that Subtopic shall be applied, as appropriate, based on the facts and circumstances of the particular transaction. That is, amounts paid for retroactive insurance shall be expensed immediately. Simultaneously, a receivable shall be established for the expected recoveries related to the underlying insured event. ##### [720-20-25-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:b06484ac90b9207549b6a8d5aac3720039931ea73cc4f5ff821b21d4fc071e8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the receivable established exceeds the amounts paid for the insurance, the resulting gain is deferred. Immediate gain recognition and liability derecognition are not appropriate because the liability has not been extinguished (the entity is not entirely relieved of its obligation). Additionally, the liability incurred as a result of a past insurable event and amounts receivable under the insurance contract do not meet the criteria for offsetting under paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1). ##### [720-20-25-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:36758b7b79057ffb0cbe7994b3d65806fd034834a1b51c9d46d1121d2ad4e02e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the purchased insurance contract includes coverage for legal and other costs, the accounting for those costs shall be consistent between the asset and the liability. That is, if the entity's accounting policy is to accrue legal and other costs, then the insurance receivable shall reflect those costs if they are covered under the terms of the insurance policy. If an entity's accounting policy is not to accrue for those costs, then the insurance receivable shall not reflect those costs on an accrual basis. ### Claims-Made Contracts #### Claims-Made Insurance Policies That Represent Purchased Retroactive Insurance Contracts ##### [720-20-25-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:dacab776543fe70e560c9e591a25610193b8d589c010626b7eb0d9a473c64287 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A claims-made insurance policy contains a retroactive provision if it provides coverage for specific known claims that were reportable prior to the policy period. Regardless of whether the insured has recognized a loss contingency for those claims, specific known claims that were reportable (by the insured entity to the insurance entity) would encompass: 1. a Asserted claims 2. b Known unasserted claims 3. c Any known previous event or circumstance that might result in a specific claim (whether asserted or unasserted). Such claims include those that were not reported by the insured to the insurance entity, but would have been reportable to the insurance entity had a claims-made policy been in place in a prior period. ##### [720-20-25-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:f003a5ebed56672e055473fff8d5143b0db0e6516e5483c9e360941c2c25f887 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a claims-made insurance policy contains a retroactive provision, the retroactive and prospective provisions of the policy shall be accounted for separately, if practicable. ##### [720-20-25-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:8942a1f76dcdbc2d209f34f509f1f0a0d4d98a0fb52b57749a33bff039b39cbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it is not practicable to separate the retroactive and prospective provisions, the claims-made insurance policy shall be accounted for entirely as a retroactive contract in accordance with Subtopic 944-605. A claims-made insurance policy that contains no retroactive provisions should be accounted for on a prospective basis as described in the [Claims-Made Contracts Subsection](https://asc.understandingaccounting.org/asc/720/20/#35-subsequent-measurement) of Section 720-20-35 and in Examples 4-5 (see paragraphs [720-20-55-13 through 55-20](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-13) ). ##### [720-20-25-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:db0b7a2e129767e29dade64739407a9037268b35b8f670a3b6313fdb6161af5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-20-15-34B](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-34B) states that in claims-made insurance, the insured event is the reporting to the insurer, within the period specified by the policy, of a claim for a loss covered by the insurance contract. Accordingly, a prospective claims-made insurance policy only covers claims for losses reportable to the insurer during the policy term. A retroactive provision provides coverage for known claims, for which the underlying event had occurred and the incident would have been reportable prior to the effective date of the claims-made policy. A recognized liability for [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") claims generally would not be determinative in concluding that a claims-made insurance policy either does or does not contain a retroactive provision. ##### [720-20-25-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:044ea2dd48135d220404254098a73af654b7e95cd4ed94380eb3a5e8f299a43d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All relevant facts and circumstances should be considered in evaluating whether a claims-made policy contains a retroactive provision. The following are indicators that a claims-made insurance policy does not contain a retroactive provision (that is, it does not provide coverage for previously reportable claims) and, therefore, shall be accounted for on a prospective basis. No one indicator is determinative in this evaluation; the determination must be made upon the specific facts and circumstances: 1. a The insured consistently purchases claims-made insurance policies as part of its risk management program for the specific type of risk being insured, and [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") for both prior periods and prior policies is readily available and not excessively priced as compared to tail coverage offered to similar entities that do not contain retroactive provisions. 2. b The claims-made insurance policy is responsive to unknown risks for a finite or limited period of time, as evidenced by the fact that all of the following conditions exist: 1. 1 The type of risk being insured is inherently short-tailed (that is, the claims are incurred during the policy period and paid out in their entirety shortly after the end of the policy period). 2. 2 The policy term is for a limited period of time (for example, one-year coverage). 3. 3 Claims-made coverage is the most readily available coverage for this type of insurance risk. 4. 4 The occurrence date of the type of risk covered by the policy is unclear (that is, the causal event that gives rise to an insured claim is difficult to determine). Such a lack of identification creates difficulty in assessing risk for an entity considering whether to self-insure its insurance risk (for example, a manufacturing entity may be completely unaware of the potential health hazards attributable to its core products and may want to protect itself in case a by-product of its production process becomes the next asbestos). 3. c The claims-made insurance policy contains an unambiguous trigger indicating that a claim is covered by the policy. That contract trigger should not be subject to interpretation, negotiation, or manipulation. An example of an unambiguous trigger that indicates that a claim is covered by a claims-made insurance policy would include both of the following provisions: 1. 1 The insured notifies the insurance carrier during the policy term that a claim has been asserted or that an incident has occurred. 2. 2 The insured must represent that it was not aware of any such incident when the claims-made policy was purchased. 4. d The premium charged for the claims-made insurance policy is not significantly in excess of the premium that would be charged for a claims-made insurance policy that could be purchased by a similar entity with similar insurance risks and no knowledge of any circumstances or events that would result in any claims, excluding any anticipated amounts for a typical number of claims for which the insured is not aware to have specifically occurred but that it expects would be reported (incurred but not reported). 5. e The insurer may base the premium for the claims-made insurance policy on estimates and predictions that are based on the past experience of the insured but the premium is not based on settlement estimates of specific, known events that are expected to be recovered under the policy. 6. f The premium charged for the policy in the current year is not significantly in excess of that charged in previous years, other than for increases in the amount or type of coverage. An anticipated increase in premiums that is expected to occur because the insured entity is advancing toward the mature stage of premiums for claims-made insurance would not be considered in making that determination. 7. g The claims-made insurance policy is primarily intended to cover insurance risk and is not a financing arrangement. Claims-made insurance policies that are intended to cover insurance risk typically include features such as: 1. 1 An absence of adjustment features based on experience 2. 2 Coverage of the ultimate loss from the claim, once made, regardless of period of settlement. 8. h If the claims-made insurance policy has a specified retroactive date prior to the inception of the claims-made relationship with the insurer, the period from that specified retroactive date to the inception of the claims-made relationship with that insurer is either short or covered by other insurance policies. ##### [720-20-25-11](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:d0899bdbf1aa87f0c249c1691e19dc07eefec1cb4ce398029b12fa880a6d42d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although the guidance in the [Retroactive Contracts Subsection](https://asc.understandingaccounting.org/asc/720/20/#25-recognition) of this Section (see paragraph [720-20-25-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-3)) applies to situations in which the insured entity uses a claims-made insurance policy to finance known losses (that is, when the insurance contract was purchased in order to provide insurance coverage for specific, known events that occurred or were reportable before the inception of the contract), the guidance in that paragraph does not preclude prospective accounting for those claims-made insurance policies or portions of those policies that contain only prospective provisions. ##### [720-20-25-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:cc202d91da5d127e34bc9d65d5bf7964a113f0d97e8bf5121ddc28818992ff5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insured entity may, for various reasons, contemporaneously enter into multiple claims-made insurance policy contracts. In those circumstances, an entity should consider whether those insurance contracts should be combined in order to determine the appropriate accounting treatment. The guidance contained in Section [944-20-15](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) is helpful in those instances. ##### [720-20-25-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:6b01a71de8fe813d480211017c31ff23d6d631031767260a51578951f39fe9f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Examples 1-3 (paragraphs [720-20-55-2 through 55-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-2) ) for illustrations of the application of the recognition guidance for claims-made contracts. #### Recognizing a Liability for Incurred but Not Reported Claims ##### [720-20-25-14](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:95cd98b28277b5f7a7967b4fde8b9e852d9b50b744aeed7c0dfabddb681d098b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) requires that insured entities (except as discussed in Section 944-20-15), including those that use a claims-made approach for insuring certain risks, recognize a liability for the probable losses from incurred but not reported claims and incidents if the loss is both probable and reasonably estimable. Paragraphs [450-20-55-10 through 55-17](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-10) provide implementation guidance about litigation, claims, and assessments. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-25-15](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:d912902414b168e07af43c8aee3de65b60b50c23086a66cd1669e4dc93694938 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a multiple-year retrospectively rated insurance contract accounted for as insurance, the insured shall recognize either of the following: 1. a As indicated in paragraph [944-20-25-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-2), a liability to the extent that the insured has an obligation to pay cash (or other consideration) to the insurer that would not have been required absent experience under the contract 2. b As indicated in paragraph [944-20-25-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-2), an asset to the extent that any cash (or other consideration) would be payable by the insurer to the insured based on experience to date under the contract. Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:9863f1c53eca0254cf50d54fa7c2c04344b08d79b7daa2311be837b7261770b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/20/#30-initial-measurement) SEC content: no ##### [720-20-30-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:f3a1c3d675830ba39b54bd0ddc13f4f7581ef1a7743e5bc5900db9c5e5942c65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 and Section 720-20-25 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk. ### Claims-Made Contracts #### Liability for Incurred but Not Reported Claims Based on the Cost of Tail Coverage ##### [720-20-30-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:17bde3b8a1863500b666d37f46ac9f7a7403767f33ca86d4bdf1108a98b59daa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimated cost of purchasing [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") is not relevant in determining the loss to be accrued because paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1) prohibits netting the insurance receivable against the claim liability. However, if the insured entity had the unilateral option to purchase tail coverage at a premium not to exceed a specified fixed maximum, then the insured entity could record a receivable for expected insurance recoveries (after considering deductibles and policy limits) for the portion of the [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability that is insurable under the tail coverage. In that case, the entity would need to record as a cost the expected premium for the tail coverage. The purchase of tail coverage does not eliminate the need to determine if an additional liability should be accrued because of policy limits or other factors. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-30-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:f891e9d557c1ddac5ff2a5261e4223a431cca2e80bfdda009e5690b76e61a3dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a multiple-year retrospectively rated insurance contract accounted for as insurance, the amount recognized in the current period shall be computed using a with-and-without method, as the difference between the insured's total contract costs before and after the experience under the contract as of the reporting date, including costs such as premium adjustments, settlement adjustments, and impairments of coverage. The amount of premium expense related to impairments of coverage shall be measured in relation to the original contract terms. Future experience under the contract (that is, future losses and future premiums that would be paid regardless of past experience) shall not be considered in measuring the amount to be recognized. ##### [720-20-30-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:aec4f6c66eb8f70643fbedd8cbd03666860ef17257010359f6b4abb9c8b9fe80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the insured could terminate the contract before the end of its term and if termination would change the amounts paid (for example, if terminating the contract would cost less than continuing the contract in force), the liability resulting from the contract shall be measured as follows: 1. a If a decision to terminate has been made, the measurement shall be based on an assumption of termination and on experience to date. 2. b Otherwise, the measurement shall be based on the lesser of the following: 1. 1 The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date) 2. 2 The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming no termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date). Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:3cff17b9ea0c6be7efa17080cc88b689c47054ddc109e8c12b35849a2caab684 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/720/20/#35-subsequent-measurement) SEC content: no ##### [720-20-35-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:ca5a6dcfa671455d14f35ea75f2adb40a2a87845c341d37bc99fc047be538493 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk. ### Retroactive Contracts #### Deferred Gain Amortization ##### [720-20-35-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:550bdaf17398cb77cdd5d3e93d21ac08185186e6fe40ac89ed11aa3fdd0bb5e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the amounts and timing of the insurance recoveries can be reasonably estimated, the deferred gain shall be amortized using the interest method over the estimated period over which the entity expects to recover substantially all amounts due under the terms of the insurance contract. If the amounts and timing of the insurance recoveries cannot be reasonably estimated, then the proportion of actual recoveries to total estimated recoveries shall be used to determine the amount of the amortization. ### Claims-Made Contracts #### Interim Financial Reporting—Entity's Fiscal Year and Policy Year Coincide ##### [720-20-35-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:c47907a12ee500beac891371c508a87cb80d7ab49493a25dbcb4a3bb68c7e656 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy year coincide, an appropriate method to recognize expense is through a combination of any of the following: 1. a Accruing the [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability 2. b Accruing any expected increase in insurance recoverables 3. c Amortizing the insurance premium on a pro rata basis over the year. In addition, the liability for any unusual claims or incidents, as well as any applicable insurance recoverable related thereto, would be recognized in the interim period in which they become known. ##### [720-20-35-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:bda655ef0bcb6c8b0917865b57bc6197a3d8d6530c8d564b572458154f0d979b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For interim reporting, the approach treats usual recurring losses as integral to annual reporting, and, therefore, any expected changes in the incurred but not reported liability and related insurance recoverables that are not related to specific events can be spread over the entire year. However, material unusual losses shall be accounted for as discrete items and recognized as they occur. The approach discussed in this Subsection assumes the recurring purchase of a claims-made insurance policy with a one-year term and the payment of premiums on the first day of each policy year. ##### [720-20-35-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:9ce674e217da573404c381920da17447210ce845ad11be7aaf4758d5e994f590 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy term coincide, the year-end incurred but not reported liability relates to the entity's obligation for claims and incidents that have been incurred prior to year-end but will be reportable after year-end. The approach for accounting by policyholders who purchase claims-made insurance policies that consist of prospective provisions is as follows: 1. a The premium paid at the beginning of the fiscal year for the new claims-made insurance policy shall be recognized as a prepaid expense. 2. b At the beginning of the fiscal year, the entity shall estimate its incurred but not reported liability as of the end of the fiscal year. That estimate involves estimating the claims and incidents that will be incurred prior to year-end but will not be reportable until after year-end. Presumably the estimated year-end incurred but not reported liability would approximate the beginning incurred but not reported liability adjusted for relevant historical patterns unless the entity has identified new factors (such as a major change in products, manufacturing processes, or risk management systems) that warrant further adjustment of the ending incurred but not reported liability. 3. c The entity shall compute an estimated annual expense as the sum of all of the following: 1. 1 The premium paid for the claims-made policy 2. 2 The difference between the beginning incurred but not reported liability and the estimated year-end incurred but not reported liability 3. 3 The difference between the beginning insurance recoverable related to the incurred but not reported liability and the estimated ending amount. That estimated annual expense shall be recognized in interim periods based on the methodology that best reflects the manner in which the benefits of the insurance coverage are consumed and the incurred but not reported liability is incurred. In addition, liabilities for specific claims incurred during the year that are not included in the incurred but not reported estimate shall be recognized as expense in the interim period in which they are incurred. The method selected shall be appropriate in light of the relevant facts and circumstances and consistently applied. 4. d The estimated year-end incurred but not reported liability shall be reviewed whenever interim financial statements are prepared. Routine adjustments to the estimated liability shall be recognized ratably in each of the remaining interim periods. However, if events and circumstances in that interim period indicate that unusual claims and incidents have been incurred prior to the end of the interim period, the entity shall recognize in that interim period any related significant adjustments of the estimated year-end incurred but not reported liability. 5. e For any insurance recoverable recognized, either related to the incurred but not reported liability or to a specific incurred claim, the entity shall evaluate those assets and adjust them, if necessary, based on changes in circumstances. See paragraphs [410-30-35-8 through 35-11](https://asc.understandingaccounting.org/asc/410/30/#410-30-35-8) for further guidance on the recognition of a receivable for expected insurance recoveries. 6. f Any unusual claims and incidents that have been incurred prior to the end of an interim period but will probably be reported prior to year-end should not affect net income if they will be covered (insured) under the existing claims-made insurance policy. However, both the asset (under the insurance claim) and the liability (for the incident) shall be reflected on the balance sheet. ##### [720-20-35-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:8102c16815d9e261fb7f582427e99f69149fd133e37d03b15f2fc6713fc370fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See the [Claims-Made Contracts](https://asc.understandingaccounting.org/asc/720/20/#45-other-presentation-matters) Subsection of Section 720-20-45 for guidance on offsetting insurance assets and liabilities. ##### [720-20-35-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:ef0ef1abc707eeeb6405db4bde1f8b870cb61837f519d6dd9ded644311a8819d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 4 (paragraph [720-20-55-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-13)) for illustrations of the application of the subsequent measurement guidance for interim financial reporting when an entity's fiscal year and policy year coincide. #### Interim Financial Reporting—Entity's Fiscal Year and Policy Year Do Not Coincide ##### [720-20-35-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:4d336440f28007e5a232fc004acba9273413925c3fbc7522ece82c414bb97b6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy year do not coincide, the insurance premium component of expense in interim periods could be based on the estimated premium for claims-made coverage that the entity expects to be able to acquire later in the fiscal year. ##### [720-20-35-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:2d5936ca9b964fca2c1d7e88f0528ba9b911be43fa2a52cf8a72d2a6e8e23e57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy term do not coincide, an entity shall recognize all of the following elements at year-end: 1. a An incurred but not reported liability related to the entity's obligation for claims and incidents that have been incurred prior to year-end but will be reportable after year-end 2. b An insurance recoverable for any outstanding claims that are reimbursable under the existing claims-made policy 3. c An asset for prepaid insurance premiums related to the coverage for claims and incidents that will be incurred after year-end but reported prior to the expiration of the existing claims-made policy. ##### [720-20-35-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:7bf93744f9c5f6d8165c6fb0d5ae7739d5485b64743453d61565fa88823a0193 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The approach for accounting by policyholders who purchase claims-made insurance policies that have terms of duration that do not coincide with the entity's fiscal year is as follows: 1. a At the beginning of the fiscal year the entity shall make an estimate of its future premium cost of the new claims-made policy that is expected to be purchased during the fiscal year. The entity shall also estimate the portion of that future premium cost that would relate to coverage for claims and incidents that will be incurred after the end of the fiscal year but reported prior to the expiration of that new claims-made policy; that portion represents the estimated prepaid asset at the end of the fiscal year. The estimate of the future premium cost involves estimating the effect of past claims and incidents that are expected to affect the premium level, as well as the effect of historical patterns and any new factors (such as a major change in products, manufacturing processes, or risk management systems) that are relevant. 2. b At the beginning of the fiscal year the entity shall make an estimate of its incurred but not reported liability as of the end of the fiscal year. That estimate involves estimating the claims and incidents that will be incurred prior to year-end but will not be reportable until after the year-end. Presumably the estimated year-end incurred but not reported liability would closely approximate the beginning incurred but not reported liability adjusted for relevant historical patterns unless the entity has identified new factors (such as a major change in products, manufacturing processes, or risk management systems) that warrant further adjustment of the ending incurred but not reported liability. 3. c The entity shall compute an estimated annual expense as the sum of all of the following: 1. 1 The balance of the premium cost for the claims-made policy expiring during the year 2. 2 The estimated future premium cost for the new claims-made policy 3. 3 The difference between the beginning incurred but not reported liability and the estimated year-end incurred but not reported liability 4. 4 The difference between the beginning and estimated ending insurance receivable related to incurred but not reported liability. That estimated annual expense should be recognized ratably in interim periods based on the methodology that best reflects the manner in which the benefits of the insurance premiums are consumed and the incurred but not reported liability is incurred. As indicated in paragraph [720-20-35-5(c)](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-5), the method selected should be appropriate in light of the relevant facts and circumstances and consistently applied. In addition, liabilities for specific claims incurred during the year that are not included in the incurred but not reported estimate shall be recognized as expense in the period in which they are incurred. 4. d The estimated year-end incurred but not reported liability should be reviewed whenever interim financial statements are prepared. Routine adjustments in the estimated liability (such as adjusting the estimated future premium cost to reflect actual) would be recognized ratably in each of the remaining interim periods. However, if events and circumstances in that interim period indicate that unusual claims and incidents have been incurred prior to the end of the interim period, the entity shall recognize in that interim period any related significant adjustments of the estimated year-end incurred but not reported liability. 5. e For any insurance recoverable recognized, either related to the incurred but not reported liability or to a specific incurred claim, the entity should evaluate those assets and adjust them, if necessary, based on changes in circumstances. Paragraphs [410-30-35-8 through 35-11](https://asc.understandingaccounting.org/asc/410/30/#410-30-35-8) provide further guidance on the recognition of a receivable for expected insurance recoveries. 6. f Any unusual claims and incidents that have been incurred prior to the end of an interim period and that will probably be reported prior to expiration of the new claims-made insurance policy should not affect net income if they will be covered by insurance. However, both the asset (under the insurance claim) and the liability (for the incident) shall be reflected on the balance sheet. ##### [720-20-35-11](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:0243cf84d006d59ea07bea799b3fd998c9c7f5a67eb230f34b575e99451ed577 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See the [Claims-Made Contracts](https://asc.understandingaccounting.org/asc/720/20/#45-other-presentation-matters) Subsection of Section 720-20-45 for guidance on offsetting insurance assets and liabilities. ##### [720-20-35-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:e9a31a727bfbb52be68c491dd02b3ca4f6821cf85484bb94ec2bd06313683793 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 5 (paragraph [720-20-55-20](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-20)) for an illustration of the application of the subsequent measurement guidance for interim financial reporting when an entity's fiscal year and policy year do not coincide. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-35-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:d845d7048e5862a5a65cee0eedd15c07a845d010f43558c43726c546c8c861c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insured shall account for changes in coverage in the same manner as changes in other contract costs, as indicated in paragraph [944-20-35-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-2). For example, the effects of decreases in coverage without a commensurate reduction in premium shall be recognized as a loss by the insured when the event causing the decrease in coverage takes place. Source downloaded (UTC): 2026-09-10T01:07:37.463Z to 2026-09-10T01:07:37.463Z Record version: sha256:c4a2bfe8f21d7a8d458e1073bd46dbd3603933a3b0ba68f340e6dc565115b76f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/20/#45-other-presentation-matters) SEC content: no ### Claims-Made Contracts ##### [720-20-45-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:37.463Z to 2026-09-10T01:07:37.463Z Record version: sha256:b165611d1988a4a1b04b5d6aad6265baff6759319ec92ee0437ccf16b4cf8b06 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unless the conditions of paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1) are met, offsetting prepaid insurance and receivables for expected recoveries from insurers against a recognized [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability or the liability incurred as a result of a past insurable event would not be appropriate. Source downloaded (UTC): 2026-09-10T01:07:40.198Z to 2026-09-10T01:07:40.198Z Record version: sha256:6f9df67821fcd305f2d36078de01d71c008268e40853c327c5ad59d9750120e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/20/#50-disclosure) SEC content: no ### Claims-Made Contracts ##### [720-20-50-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:40.198Z to 2026-09-10T01:07:40.198Z Record version: sha256:0ba643eafe9a8693d4560df344c7305d0431e67e6b8f8500a9ab220f3f7050b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity changes from occurrence-based insurance to claims-made insurance or elects to significantly reduce or eliminate its insurance coverage paragraphs [450-20-50-3 through 50-6](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure if it is at least reasonably possible that a loss has been incurred. That paragraph also discusses disclosure with respect to unasserted claims. Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:a974c1e17cad033094c7a62de59c80fb620ce00212430334fedbab3296c8e86e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/20/#55-implementation-guidance-and-illustrations) SEC content: no ### Claims-Made Contracts #### Illustrations ##### [720-20-55-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:c73e5eefe308baed7da72a74e255d342aa4fe0faef82be86a529019cff39a4d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 1-3 (see paragraphs [720-20-55-2 through 55-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-2) ) provide illustrations for applying the guidance contained in paragraphs [720-20-25-6 through 25-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-6) . ##### [720-20-55-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:e8d25a778cf9df954ca9f2df3ff7438dff7b8d2db5f8de3461dac6ca7d8a45dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates how to assess whether an insurance policy for directors and officers liability contains a retroactive provision. The Example contains the following two Cases: 1. a A policy without a retroactive provision (Case A) 2. b A policy with a retroactive provision (Case B). ##### [720-20-55-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:bd4a373271b5b13a5dd7f5d1d0801885c934a3e947732af453af81c2a13ffb12 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A is a manufacturer that purchases directors and officers insurance under a claims-made insurance policy each year. Entity A immediately reports any asserted claims or incidents that could result in an asserted claim to its insurance carrier. Entity A currently has no knowledge of any unasserted claims against it and is unaware of any event that would result in any claims. Entity A considers the use of a claims-made insurance policy to be the most efficient and least costly method available to manage its insurance risk related to suits against its directors and officers. Entity A pays BrokerCo to handle its insurance needs. BrokerCo supplies Entity A with binding quotes from several insurance carriers and a comparison to binding quotes for other similar entities. Entity A believes that its premiums are comparable to those of other similar entities that have similar insurance risk profiles and no knowledge of any events or circumstances that might result in a claim. Entity A has an option to purchase tail coverage, which would effectively convert its claims-made policies into occurrence-based policies at any time. On January 1, 20X3, Entity A pays its annual premium of $5 million for its policy. The policy has a retroactive date to January 1, 20X0, which is the year that Entity A first started using the claims-made insurance approach with its insurance carrier. Entity A is unable to bifurcate its policy premium into its retroactive and prospective provisions. ##### [720-20-55-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:20c51ac521eb6e3fe1ba4d231df2212b1675af3a46818b1bd7d9d39db53fe16a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In June 20X3, there is a precipitous drop in the stock price of Entity A, and a lawsuit is brought against the directors. Entity A notifies its insurer about the asserted claim, and the insurer agrees that those claims are covered by its claims-made policy in effect for 20X3. ##### [720-20-55-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:54229a3abeacd54d517fc7adc41536748fa045c46b946adbcbea39b1044f30ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the circumstances, Entity A determined in 20X0 that its claims-made insurance policy is a prospective contract that does not contain any retroactive provisions. Essentially, Entity A was unaware of any known events or circumstances that might result in a claim and viewed the premiums paid for its directors and officers insurance as providing coverage against claims that might occur during the policy period. In making its determination that the claims-made insurance policy did not contain a retroactive provision, Entity A also considered the following: 1. a Entity A typically uses a claims-made policy to manage its insurance risk and plans to continue purchasing a claims-made insurance policy annually. 2. b Tail coverage is readily available. 3. c The premium charged for the claims-made policy is not significantly in excess of premiums charged to other similar entities with similar insurance profiles. 4. d The claims-made policy contains an unambiguous contract trigger to determine when claims are covered. 5. e Because Entity A has no knowledge of any asserted claims or events that would result in a claim, the claims-made policy is primarily expected to cover insurance risk related to future claims. ##### [720-20-55-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:c2e6dabf3118b74cc0709fe042bfe492d02893bd9a62ceabbe6b51acb9330202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Case makes the same assumptions as Case A, except that the precipitous drop in the stock price of Entity A occurred in 19X9, prior to the inception of its claims-made insurance program with its insurance carrier. During the negotiation of the contract premium, Entity A discussed its concerns with its insurance carrier, and the two agreed that the retroactive date would include any claims related to the drop in the stock price. As a result, the premium was $50 million. ##### [720-20-55-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:0810e5b5b636e33d1d4a75baae6a6136684c25f79048b927e4127a8c7f24a1c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the circumstances, Entity A determined in 20X0 that its claims-made insurance policy contains a retroactive provision. Entity A knows that the $50 million premium charged represents the expected costs of settling any claims related to the drop in its stock price, an event that was fully known at the inception of the contract. Entity A disclosed this fact to its insurer, and the two agreed that it might result in a claim and negotiated a premium based on that premise. In making its determination that its directors and officers policy contains a retroactive provision, Entity A also considered the following: 1. a The claims-made policy was taken out in part in response to a known incident that was reported to the insurer. 2. b The premium charged by the insurer includes an estimate of the expected settlement costs for the unasserted claim. 3. c The premium charged primarily represents a financing of the unasserted claim. ##### [720-20-55-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:9c456d2d207355058b5bda682b7b8e350456977ec97281f53489f5836ae173bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prior to accounting for the entire contract retroactively, Entity A should, if practicable, bifurcate the contract into its retroactive and prospective provisions and account for each separately. ##### [720-20-55-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:224e20d0c1212c101e45ff9e95132973e72e29e2be829acfa3ff9903695c85ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On February 20, 20X2, Entity A determined that it needed to recognize a $100 million liability for environmental contamination as a result of an accident at one of its manufacturing plants. Entity A initially believed that it would manage the cleanup and any lawsuits arising from the accident through an internal self-insurance program. Subsequently, Entity A decided to purchase a claims-made insurance policy that would include all claims arising from the incident. Entity A decided that it should purchase the policy because it would be more efficient to transfer the risk associated with the development and timing of claims to a third party and representing that the risk associated with all claims had been transferred to a third party would reduce the risk profile of Entity A to its shareholders and other potential investors. On April 1, 20X2, Entity A pays InsurerCo $60 million for a claims-made insurance policy. Entity A and InsurerCo expect the claims related to the incident to be settled over a 10-year period after the purchase of the policy. ##### [720-20-55-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:74f2bd169c247ffb6fd21fbd44e225c189116da262d8c31183e11dfdb54f0734 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the indicators, Entity A determines that its claims-made insurance policy contains a retroactive provision. In making that determination, Entity A specifically considered the following: 1. a The claims-made policy was purchased specifically to cover known claims for which a liability had been recognized. 2. b The claims-made policy effectively represented a financing of the liability previously recognized by Entity A. 3. c The premium charged was primarily based on expected payouts for an event that had already occurred. ##### [720-20-55-11](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:7fb2c475d93dd8dc0be2e694b216c7b47874b856f40372f012abb9a3aeee99a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. HealthCo is a health care provider that purchases medical malpractice insurance in order to manage its insurance risks. HealthCo purchases a claims-made insurance policy each year from its insurance carrier. HealthCo would be able to purchase tail coverage from its insurance carrier if it chose to do so. Although HealthCo has no knowledge of any asserted or unasserted claims against it, HealthCo estimates and recognizes a liability for claims [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") of $25 million at December 31, 20X2, based on actuarial reviews of its historical claims reporting and payment patterns. HealthCo engages an insurance brokerage entity to ensure that its insurance premiums are consistent with those offered to similar entities with similar insurance risks. During 20X2, HealthCo paid out $95 million of malpractice claims that were fully covered by its insurance program. On January 1, 20X3, HealthCo pays its annual premium of $100 million for its claims-made policy. HealthCo expects that it will require a liability of $29 million on December 31, 20X3. The policy does not cover incidents occurring prior to the inception of the claims-made insurance program with that insurance carrier. In negotiating its policy with InsurerCo, HealthCo asserts to InsurerCo that it is unaware of any specific, current claims (asserted or unasserted) against it. ##### [720-20-55-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:488b80f12e480dae68b9fd53504eda504699e0ea6aaf53fa64f674bd88a40a2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the indicators, HealthCo determines that its claims-made insurance policy is a prospective contract that does not contain any retroactive provisions. In making that determination, HealthCo specifically considered the following: 1. a There are no known asserted or unasserted claims that are expected to be covered by the policy. The liability recognized for incurred but not reported claims would not preclude HealthCo from concluding that its claims-made insurance policy is prospective as HealthCo represented that it did not know of any asserted claims. 2. b Tail coverage is readily available. 3. c The premium charged for the claims-made policy is not significantly in excess of premiums charged for similar policies with no retroactive dates. 4. d There is a clear and unambiguous contract coverage trigger. ##### [720-20-55-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:b25e956465b0d8c4955338680fa51ccbfce78ce1914d56d3b2f7c122d1a28d4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides illustrations for applying the guidance contained in paragraphs [720-20-35-3 through 35-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-3) . This Example contains the following Cases: 1. a Calculations are made using assumed facts (Case A). 2. b The entity revises its incurred but not reported estimate (Case B). 3. c The entity discovers a defect in the manufacturing process (Case C). ##### [720-20-55-14](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:661c10bd41e5e07c4195c0a33e6d9d3eb19e249fbca88aa37a22c3d09fc176cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C illustrate how to calculate various required amounts (for example, the expected annual insurance expense, the expected quarterly insurance expense, the incurred but not reported liability, the known claims liability and the prepaid insurance) under each Case's different circumstances. Cases A, B, and C share all of the following assumptions. 1. a Entity A purchases claims-made policies every year for its insurable risk. The insurance arrangement meets the criteria for prospective treatment as described in paragraphs [720-20-25-7 through 25-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-7) . The policy has a $500,000 per incident deductible and a $2 million per incident maximum with a policy limit of $15 million. When calculating the insurance recoverable related to incurred but not reported incidents, Entity A assumes that approximately 50 percent of the gross claim value will be recovered because of the deductible. Entity A does not anticipate incurring any losses in excess of the policy's maximums. 2. b Accrued incurred but not reported liability at 12/31/X0: $2 million. 3. c Receivable for insurance recoverable at 12/31/X0: $1 million. 4. d Estimated incurred but not reported liability at 12/31/X1: $2.2 million. 5. e Estimated receivable for insurance recoverable at 12/31/X1: $1.1 million. 6. f Premium for claims-made policy for year ending 12/31/X1, payable 1/1/X1: $1.6 million. 7. g Value of claim for an incident reported during the second quarter (the claim is covered by the insurance policy subject to a $500,000 deductible and was both paid to the claimant and recovered from the carrier during the third quarter): $750,000. - ![](https://asc.understandingaccounting.org/asc-img/GUID-E1A2AB68-D413-4AC6-862D-15F8A90EF01D-low.gif) Computations (in thousands): Expected annual expense = annual premium + expected increase in IBNR liability - expected increase in insurance recoverable = "$1,600 + ($2,200 - $2,000) - ($1,100 - $1,000)" = "$1,600 + $200 - $100" = "$1,700 " Expected quarterly expense = "$1,700 ÷ 4 = $425" IBNR: Incurred but not reported ##### [720-20-55-15](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:d21ec0e7fd3c67241a10a20d9c11ef5132beef83041c0f977ed605d8eaba2eed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates computation of quarterly insurance expense. - ![](https://asc.understandingaccounting.org/asc-img/GUID-F5991464-DAF7-49A6-BDAB-29AF4C846622-low.gif) INBR liability (a) (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,100)" " $(2,150)" Add: accrual (b) -50 -50 -50 -50 "Balance, end of quarter" " $(2,050)" " $(2,100)" " $(2,150)" " $(2,200)" Known claims liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- $- $(750) $- Add: claims made - (750) - - Less: claims paid - - 750 - "Balance, end of quarter" $- $(750) $- $- Prepaid insurance (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- " $1,200 " $800 $400 Add: premium payments made " 1,600 " - - - Less: amortization (c) (400) (400) (400) (400) "Balance, end of quarter" " $1,200 " $800 $400 $- Insurance recoverable (d) (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,300 " " $1,075 " Add: Expected recoveries 25 275 25 25 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,300 " " $1,075 " " $1,100 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 50 50 50 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (275) (25) (25) Total expense $425 $925 $425 $425 IBNR: Incurred but not reported (a) "Paragraph 210-20-45-1 provides additional guidance on when the legal right to setoff exists and should be used to determine whether prepaid insurance (or insurance recoverable) and a recognized incurred but not reported liability (or the claim liability incurred as a result of a reported event) may be offset. Such offsetting would not be appropriate unless the conditions of that paragraph are met. For income statement purposes, however, the expenses related to claims reported and the income related to insurance recoverables may be offset." (b) Straight-line accrual of the incurred but not reported liability is assumed for purposes of simplicity but would only be appropriate if management expects that the underlying incurred but not reported claims covered by the insurance arrangement would occur evenly throughout the year. See paragraphs 720-20-35-3 through 720-20-35-7. (c) Straight-line amortization of the prepaid insurance premium is assumed for purposes of simplicity only. See paragraph 720-20-35-5. (d) Paragraphs 410-30-35-8 through 410-30-35-11 provide further guidance on the recognition of a receivable for expected insurance recoveries. ##### [720-20-55-16](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:9ca4c0183a877ab440ad5e34c2409a31efe1a044648d236a4c75455bb84a0ae2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case Entity A revises its estimated year-end incurred but not reported liability from $2.2 million to $2.6 million in the second quarter due to overall increases in settling claims, which is considered a routine adjustment by management, and Entity A determines that a reasonable matching of the additional cost to the periods benefited results in recognizing one-half of the adjustment in the second quarter and the remainder of the adjustment over the remaining interim periods on a pro rata basis. ##### [720-20-55-17](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:9bd2e19cdd131446124dd56b7d2c2140b95aebc81fdabe5bb133ebe5481d6a13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates computation of quarterly insurance expense. - ![](https://asc.understandingaccounting.org/asc-img/GUID-4AA0FA58-9BF8-4A14-B668-65B87AB25E0A-low.gif) IBNR liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,300)" " $(2,450)" Add: accrual (50) (250) (150) (150) "Balance, end of quarter" " $(2,050)" " $(2,300)" " $(2,450)" " $(2,600)" Known claims liability (in thousands): Same as Example 5. Prepaid insurance (in thousands): Same as Example 5. Insurance recoverable (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,400 " " $1,225 " Add: Expected recoveries 25 375 75 75 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,400 " " $1,225 " " $1,300 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 250 150 150 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (375) (75) (75) Total expense $425 " $1,025 " $475 $475 IBNR: Incurred but not reported ##### [720-20-55-18](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:c7af91617db3ea439c0ca48ba3636cea08b9aefdd0c52eb44b777aea85d99899 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case Entity A discovers a defect in the manufacturing process in the third quarter and corrects it. Entity A evaluates whether its incurred but not reported liability warrants adjustment and concludes that an additional $2.1 million liability is needed for claims that are expected to be reported after year-end. Entity A considers the discovery of the defect to be an unusual event and determines that a reasonable matching of the additional cost to the periods benefited results in the entire adjustment being recognized in the third quarter. ##### [720-20-55-19](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:31078c7d02a6cb95a8477fe1e0bc490bd4f8978f5cdce9f95b0d654a2518be2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates computation of quarterly insurance expense. - ![](https://asc.understandingaccounting.org/asc-img/GUID-97F03D22-524B-4CBB-83AA-520C4F511E5F-low.gif) IBNR liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,300)" " $(2,450)" Add: accrual (50) (250) (150) (150) "Balance, end of quarter" " $(2,050)" " $(2,300)" " $(2,450)" " $(2,600)" Known claims liability (in thousands): Same as Example 5. Prepaid insurance (in thousands): Same as Example 5. Insurance recoverable (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,400 " " $1,225 " Add: Expected recoveries 25 375 75 75 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,400 " " $1,225 " " $1,300 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 250 150 150 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (375) (75) (75) Total expense $425 " $1,025 " $475 $475 IBNR: Incurred but not reported ##### [720-20-55-20](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:309f28e4ebc4be3a3a81e4ac21d1ed94226d75eb7f534f9a7260a4a21319453a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides an illustration for applying the guidance contained in paragraphs [720-20-35-8 through 35-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-8) . This Example has the following assumptions: 1. a Entity A purchases claims-made policies every year for its insurable risk. The insurance arrangement meets the criteria for prospective treatment as described in paragraphs [720-20-25-7 through 25-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-7) . The policy has a $500,000 per incident deductible and a $2 million per incident maximum with a policy limit of $15 million. When calculating the insurance recoverable related to incurred but not reported incidents, Entity A assumes that approximately 50 percent of the gross claim value will be recovered because of the deductible. Entity A does not anticipate incurring any losses in excess of the policy's maximums. 2. b The policy period runs from May 1 to April 30, and uses a December 31 year-end for financial reporting purposes. 3. c Accrued incurred but not reported liability at 12/31/X0: $2 million. 4. d Receivable for insurance recoverable at 12/31/X0: $1 million. 5. e Estimated incurred but not reported liability at 12/31/X1: $2.2 million. 6. f Estimated receivable for insurance recoverable at 12/31/X1: $1.1 million. 7. g Premium for one year claims-made policy expiring 4/30/X1: $1.2 million. 8. h Estimated premium for one-year claims-made policy commencing 5/1/X1: $1.8 million. 9. i Value of claim for an incident reported during the second quarter (the claim is covered by the insurance policy subject to a $500,000 deductible and was both paid to the claimant and recovered from the carrier during the third quarter): $750,000. - ![](https://asc.understandingaccounting.org/asc-img/GUID-2548C0DC-D98E-4181-B680-E37BBA159B13-low.gif) Computations (in thousands): Expected annual expense = premium costs + expected increase in IBNR liability - expected increase in insurance recoverable = " {\[$1,200 × (4/12)\] + \[$1,800 × (8/12)\]} + ($2,200 - $2,000) - (1,100 - 1,000) " = " ($400 + 1,200) + $200 - $100 " = "$1,700 " Expected quarterly expense = " $1,700 ÷ 4 = $425 " IBNR: Incurred but not reported - ![](https://asc.understandingaccounting.org/asc-img/GUID-8957FB30-351E-4E55-89DD-09B477E704B6-low.gif) INBR liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,100)" " $(2,150)" Add: accrual (50) (50) (50) (50) "Balance, end of quarter" " $(2,050)" " $(2,100)" " $(2,150)" " $(2,200)" Known claims liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- $- $(750) $- Add: claims made - (750) - - Less: claims paid - - 750 - "Balance, end of quarter" $- $(750) $- $- Prepaid insurance (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- " $1,200 " " $1,400 " $400 Add: premium payments made " 1,600 " - - - Less: amortization (400) (400) (400) (400) "Balance, end of quarter" " $1,200 " $800 $400 $- Insurance recoverable (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,300 " " $1,075 " Add: Expected recoveries 25 275 25 25 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,300 " " $1,075 " " $1,100 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 50 50 50 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (725) (25) (25) Total expense $425 $925 $425 $425 IBNR: Incurred but not reported Source downloaded (UTC): 2026-09-10T01:07:45.379Z to 2026-09-10T01:07:45.379Z Record version: sha256:69034ca22bebb11d5ac50bb35c0ef55de33fe545c5ff09e91a4f2fbb1b679ea3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/720/20/#60-relationships) SEC content: no ### Claims-Made Contracts #### Health Care Entities ##### [720-20-60-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:45.379Z to 2026-09-10T01:07:45.379Z Record version: sha256:b5307743a8786c4343b2402c08911db2ca11e7366dd4b15fdfbc9714674fb33b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on the recognition of a liability for claims [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity."), see paragraph [954-450-25-2](https://asc.understandingaccounting.org/asc/450/954/#450-954-25-2). Source downloaded (UTC): 2026-09-10T01:07:47.863Z to 2026-09-10T01:08:09.526Z Record version: sha256:2a644c504815f3eff63d1f9843bac8c79bac511433f83388333d260c73ffc90d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25: Other Expenses — Contributions Made ### Machine-generated study aids ```json { "summary": "ASC 720-25 governs how a resource provider (any entity) accounts for contributions it makes, including unconditional promises to give. Contributions made are recognized as expenses in the period made, with a corresponding decrease in assets or increase in liabilities, and are measured at the fair value of the assets given (or of the donee liabilities cancelled). Conditional promises are not recognized until the barrier is overcome, using the same conditionality analysis as the contributions received guidance in 958-605.", "key_points": [ "Contributions made are recognized as expenses in the period made and as decreases of assets or increases of liabilities depending on the form of the benefit given; unconditional promises to give cash are recorded as payables and contribution expense (720-25-25-1).", "Whether a contribution or promise to give is conditional is determined under the Contributions Received Subsection of Section 958-605-25, and the same guidance applies to resource providers (720-25-25-1; 720-25-55-2).", "If the fair value of a transferred asset differs from its carrying amount, a gain or loss is recognized on disposition of the asset (720-25-25-2; see 845-10-30-1 through 30-2).", "Contributions made are measured at the fair value of the assets given, or, when made by settling or cancelling a donee's liabilities, at the fair value of the liabilities cancelled (720-25-30-1).", "Unconditional promises to give expected to be paid in less than one year may be measured at net settlement value as a reasonable estimate of fair value (720-25-30-2).", "The Subtopic applies to all entities; NFPs also look to 958-720, and recipients apply the contributions received guidance in 958-605-15-3 through 15-5A (720-25-15-1; 720-25-15-2).", "No disclosures are required by this Subtopic for makers of promises or indications of intention to give because Topics 450 and 470 supply the relevant disclosure requirements (720-25-50-1)." ], "categories": [ "Recognition", "Initial measurement", "Not-for-profit", "Fair value" ], "audience_level": "intermediate", "student_note": "This is the mirror image of contributions received: the donor expenses the gift when made, but only if the promise is unconditional. The common mistake is accruing an expense for a conditional promise (or a mere intention to give) and forgetting to record a gain or loss when donated property's fair value differs from its carrying amount.", "related_topics": [ "958-720", "958-605", "845-10", "450", "470" ], "key_concepts": [ "contributions made", "unconditional promise to give", "conditional contribution", "barrier", "fair value measurement", "net settlement value", "donated inventory", "resource provider" ] } ``` Source downloaded (UTC): 2026-09-10T01:07:47.863Z to 2026-09-10T01:07:47.863Z Record version: sha256:e34e5ddd312be0adf70940c8b63c67faed308ecfffa1da7a0e70056b4c9356e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/25/#00-status) SEC content: no ##### [720-25-00-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:47.863Z to 2026-09-10T01:07:47.863Z Record version: sha256:692d97e8c0999f9d3754eca8a17b76a62d89ddb3733bd53c064af08297398681 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
Conditional ContributionAddedAccounting Standards Update No. 2018-0806/21/2018
ContributionAmendedAccounting Standards Update No. 2018-0806/21/2018
ContributionAmendedAccounting Standards Update No. 2010-0701/28/2010
Donor-Imposed ConditionAddedAccounting Standards Update No. 2018-0806/21/2018
Not-for-Profit EntityAddedAccounting Standards Update No. 2018-0806/21/2018
720-25-15-1 through 15-3
AmendedAccounting Standards Update No. 2018-0806/21/2018
720-25-15-2AmendedAccounting Standards Update No. 2014-0905/28/2014
720-25-25-1AmendedAccounting Standards Update No. 2018-0806/21/2018
720-25-50-1AmendedAccounting Standards Update No. 2018-0806/21/2018
720-25-55-1AddedAccounting Standards Update No. 2018-0806/21/2018
720-25-55-2AddedAccounting Standards Update No. 2018-0806/21/2018
Source downloaded (UTC): 2026-09-10T01:07:50.162Z to 2026-09-10T01:07:50.162Z Record version: sha256:b8a9dbd798670dce9a3730e7359213e1761e9d870a982257b6a209a494300e93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/25/#05-overview-and-background) SEC content: no ##### [720-25-05-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:50.162Z to 2026-09-10T01:07:50.162Z Record version: sha256:5b59162c14fef89083060ee91c060af86af9aeea37dd4b8c7565cac638638e0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on accounting for [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") made, including [unconditional promises to give](https://asc.understandingaccounting.org/glossary/u/#unconditional-promise-to-give "A promise to give that depends only on passage of time or demand by the promisee for performance."). Source downloaded (UTC): 2026-09-10T01:07:53.263Z to 2026-09-10T01:07:53.263Z Record version: sha256:9329aff1304a0d3d8ccc77a4fbdcfa7d869498145f214786d6687748190ceced Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/25/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [720-25-15-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:53.263Z to 2026-09-10T01:07:53.263Z Record version: sha256:332916c3756f86199cce5e1b886bfcda0aabc9eb70adb191ae8602d075714811 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. Not-for-profit entities (NFP) should see Subtopic 958-720 on other expenses for additional guidance on contributions made. #### Transactions ##### [720-25-15-2](https://asc.understandingaccounting.org/asc/720/25/#720-25-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:53.263Z to 2026-09-10T01:07:53.263Z Record version: sha256:38ac0d20ba99a59fb3d50147aef2c0242dd64054d7b227aa9768d37823263dea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") of cash and other assets, including [promises to give](https://asc.understandingaccounting.org/glossary/p/#promise-to-give "A written or oral agreement to contribute cash or other assets to another entity. A promise carries rights and obligations—the recipient of a promise to give has a right to expect that the promised assets will be transferred in the future, and the maker has a social and moral obligation, and generally a legal obligation, to make the promised transfer. A promise to give may be either conditional or unconditional.") made by resource providers. For all entities that receive contributions, see the contributions received guidance in paragraphs [958-605-15-3 through 15-5A](https://asc.understandingaccounting.org/asc/605/958/#605-958-15-3). ##### [720-25-15-3](https://asc.understandingaccounting.org/asc/720/25/#720-25-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:53.263Z to 2026-09-10T01:07:53.263Z Record version: sha256:ddc2a12ca31258e4d38b01becdc69ca377d983e8c4d8d6c52a72af8fc1bc0c3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the transactions and activities specified in paragraph [958-605-15-6](https://asc.understandingaccounting.org/asc/605/958/#605-958-15-6), which is in the Contributions Received Subsection of that Subtopic. 1. a [Subparagraph superseded by Accounting Standards Update No. 2018-08](https://asc.understandingaccounting.org/updates/asu-2018-08/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2018-08](https://asc.understandingaccounting.org/updates/asu-2018-08/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2018-08](https://asc.understandingaccounting.org/updates/asu-2018-08/). 4. d [Subparagraph superseded by Accounting Standards Update No. 2018-08](https://asc.understandingaccounting.org/updates/asu-2018-08/). Source downloaded (UTC): 2026-09-10T01:07:58.617Z to 2026-09-10T01:07:58.617Z Record version: sha256:9b347169b73523afc9ecc83a1a108b31dcf2982de90714315480924e6a1807c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/25/#25-recognition) SEC content: no ##### [720-25-25-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:58.617Z to 2026-09-10T01:07:58.617Z Record version: sha256:c548e664c9928d4f3f7d782f6289a6556764d4b1c4b17ba23376096ba5cb8d51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") made shall be recognized as expenses in the period made and as decreases of assets or increases of liabilities depending on the form of the benefits given. For example, gifts of items from inventory held for sale are recognized as decreases of inventory and contribution expenses, and [unconditional promises to give](https://asc.understandingaccounting.org/glossary/u/#unconditional-promise-to-give "A promise to give that depends only on passage of time or demand by the promisee for performance.") cash are recognized as payables and contribution expenses. For guidance on determining whether a contribution, including promises to give, is conditional, see the Contributions Received Subsection of Section 958-605-25. ##### [720-25-25-2](https://asc.understandingaccounting.org/asc/720/25/#720-25-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:58.617Z to 2026-09-10T01:07:58.617Z Record version: sha256:ac778811f0f3788018b5218c3d04d7aac8b143486b7e8ceb30732bc3552e2bf0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the fair value of an asset transferred differs from its carrying amount, a gain or loss shall be recognized on the disposition of the asset (see paragraphs [845-10-30-1 through 30-2](https://asc.understandingaccounting.org/asc/845/10/#845-10-30-1) ). Source downloaded (UTC): 2026-09-10T01:08:01.722Z to 2026-09-10T01:08:01.722Z Record version: sha256:7a1374d4f147709ffa1e9a8e946eecd610eb547c75dc5bdee46019082ffb5112 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/25/#30-initial-measurement) SEC content: no ##### [720-25-30-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:01.722Z to 2026-09-10T01:08:01.722Z Record version: sha256:e9747b9e92e1f0193b2dce20236e4b5bb749e0d1d0c883328de8ab85210b911f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") made shall be measured at the fair values of the assets given or, if made in the form of a settlement or cancellation of a donee's liabilities, at the fair value of the liabilities cancelled. ##### [720-25-30-2](https://asc.understandingaccounting.org/asc/720/25/#720-25-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:01.722Z to 2026-09-10T01:08:01.722Z Record version: sha256:ce33a1e33686ef78aaf2682ac3d5940756710af00f3849158a69c306fb82f739 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Unconditional promises to give](https://asc.understandingaccounting.org/glossary/u/#unconditional-promise-to-give "A promise to give that depends only on passage of time or demand by the promisee for performance.") that are expected to be paid in less than one year may be measured at net settlement value because that amount, although not equivalent to the present value of estimated future cash flows, results in a reasonable estimate of fair value. Source downloaded (UTC): 2026-09-10T01:08:05.531Z to 2026-09-10T01:08:05.531Z Record version: sha256:5e03751fc6701ebf1ec1d9a5eef366acd95b16591e4e52c0f719e0615912352f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/25/#50-disclosure) SEC content: no ##### [720-25-50-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:05.531Z to 2026-09-10T01:08:05.531Z Record version: sha256:104310354456a1ba51858476a6f37223ad66e157abb178d057d80aa364325e88 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not require disclosures for makers of promises and indications of intentions to give because Topics 450 and 470 provide the relevant disclosure requirements. Source downloaded (UTC): 2026-09-10T01:08:09.526Z to 2026-09-10T01:08:09.526Z Record version: sha256:64c10b516a4f473d4f49ec097393157c61da8f144ece73eef049bc22e1527bd9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-25-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/25/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [720-25-55-1](https://asc.understandingaccounting.org/asc/720/25/#720-25-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:09.526Z to 2026-09-10T01:08:09.526Z Record version: sha256:fb07cbfb36c24fd2edf6f5b4440b21ac1fc3ec4deb77584de734963ee381b5ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [958-720-55-1A](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-1A) for a diagram that depicts the process for determining whether a [contribution](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") is conditional in addition to distinguishing contributions from exchange transactions. Paragraphs [958-605-55-4 through 55-6](https://asc.understandingaccounting.org/asc/605/958/#605-958-55-4) and [958-605-55-13A through 55-14I](https://asc.understandingaccounting.org/asc/605/958/#605-958-55-13A) provide additional guidance and illustrations on what is a [conditional contribution](https://asc.understandingaccounting.org/glossary/c/#conditional-contribution "A contribution that contains a donor-imposed condition."). ##### [720-25-55-2](https://asc.understandingaccounting.org/asc/720/25/#720-25-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:09.526Z to 2026-09-10T01:08:09.526Z Record version: sha256:9e48e38fa1a8841f73b60f609f988deff602fe0572976863a1d8777cac6fbc2f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [958-605-55-17A through 55-17F](https://asc.understandingaccounting.org/asc/605/958/#605-958-55-17A) and [958-605-55-70A through 55-70T](https://asc.understandingaccounting.org/asc/605/958/#605-958-55-70A) for implementation guidance and illustrations on determining whether a contribution is conditional. That guidance applies to contributions made by a resource provider (for example, a corporate foundation, a corporation, or a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") \[NFP\]) as well as contributions received by a recipient. Source downloaded (UTC): 2026-09-10T01:08:12.940Z to 2026-09-10T01:08:30.360Z Record version: sha256:cce43391ea3c15b189bace6cc8ba18f5f280cbd7556edf3ffd22cae152f4a434 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-30: Other Expenses — Real and Personal Property Taxes ### Machine-generated study aids ```json { "summary": "ASC 720-30 governs when an accrual-basis taxpayer records a liability for real and personal property taxes and how much is charged to income in each period. Legal liability for such taxes generally attaches at a specific event date (assessment date, lien date, levy date, etc.) determined by state law, but the preferred accounting is a monthly accrual over the fiscal period of the taxing authority for which the taxes are levied. Accrued property taxes are current liabilities, and later revisions of estimated amounts run through the income statement.", "key_points": [ "Unlike excise, income, and social security taxes, property taxes are based on assessed valuation of tangible and intangible property as of a given date, and legal liability generally accrues at a specific event rather than over time (720-30-25-1).", "Possible legal accrual dates include the assessment date, beginning or end of the taxing authority's fiscal year, lien date, levy date, payment date, delinquency date, or the tax period on the bill; the controlling date depends on the law and court decisions of the state concerned (720-30-25-1).", "Inability to determine the exact amount of the tax is no justification for failing to recognize an existing tax liability (720-30-25-6).", "The most acceptable basis is monthly accrual on the taxpayer's books during the fiscal period of the taxing authority for which the taxes are levied, so the books show the appropriate accrual or prepayment at any closing date, applied consistently (720-30-25-7).", "When a prior year's estimated provision must be adjusted once the actual amount is known, the adjustment is ordinarily made through the income statement, either combined with the current year's provision or as a separate item (720-30-35-1).", "Accrued property taxes, estimated or known, are presented among current liabilities, and are described as estimated where subject to substantial uncertainty (720-30-45-1).", "Property taxes may be charged to operating expenses, shown as a separate deduction from income, or distributed among accounts such as factory overhead, rent income, and selling or general expenses; capitalization in property accounts is sometimes appropriate for property being developed for use or sale (720-30-45-3)." ], "categories": [ "Recognition", "Subsequent measurement", "Presentation", "Inventory and PP&E" ], "audience_level": "introductory", "student_note": "Property taxes are not income taxes—do not apply ASC 740 or combine them with income taxes on the face of the statements; the default answer is ratable monthly accrual over the taxing authority's fiscal year, with revised estimates run through current income rather than restated as errors.", "related_topics": [ "740", "450", "970", "835-20", "720-10" ], "key_concepts": [ "real and personal property taxes", "assessment date", "lien date", "monthly accrual", "fiscal period of the taxing authority", "estimated liability", "current liabilities", "capitalization of real estate taxes" ] } ``` Source downloaded (UTC): 2026-09-10T01:08:12.940Z to 2026-09-10T01:08:12.940Z Record version: sha256:6e6a99b65d9d0110c0a6b42b97b73a294624f739d8e17d656bdf539be2749800 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/30/#05-overview-and-background) SEC content: no ##### [720-30-05-1](https://asc.understandingaccounting.org/asc/720/30/#720-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:12.940Z to 2026-09-10T01:08:12.940Z Record version: sha256:5c881839d8d3fd7985fd4f3bdea9f4ae99e0dc24d8c967d7d83be5b5442e9556 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting for real and personal property taxes, specifically, when to record the tax liability and the amounts to be charged to income in future periods. Source downloaded (UTC): 2026-09-10T01:08:16.887Z to 2026-09-10T01:08:16.887Z Record version: sha256:7707e8332c89e318d744098ede5843ff008b3e45b08f11b6e763e76a6944efd4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-30-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/30/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [720-30-15-1](https://asc.understandingaccounting.org/asc/720/30/#720-30-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:16.887Z to 2026-09-10T01:08:16.887Z Record version: sha256:9b10a4ead272b5da1d47c36f622dc8fe2fa314f2bd8b507c3e004106347cb6c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:611ec5c4eca907e487781aad46176b970680226107da3eaa9059f33b43010dcc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/30/#25-recognition) SEC content: no #### Legal Liability for Property Taxes ##### [720-30-25-1](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:35e9cc4be65a8e4f888ddb5b5495cf587247eaf60c639c2785e80523e483e230 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unlike excise, income, and social security taxes, which are directly related to particular business events, real and personal property taxes are based on the assessed valuation of property (tangible and intangible) as of a given date, as determined by the laws of a state or other taxing authority. The legal liability for such taxes is generally considered as accruing at the moment of occurrence of some specific event, rather than over a period of time. Depending on jurisdiction, various dates on which certain property taxes may accrue legally include the following: 1. a Assessment date 2. b Beginning of taxing authority's fiscal year 3. c End of taxing authority's fiscal year 4. d Date on which tax becomes a lien on the property 5. e Date tax is levied 6. f Date or dates tax is payable 7. g Date tax becomes delinquent 8. h Tax period appearing on tax bill. In a given case several of these dates may coincide. The date to be applied in a particular case necessarily requires reference to the law and court decisions of the state concerned. ##### [720-30-25-2](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:dc6e4b887ad55a7cb654b877f1d7563cd26c5553c33b07f60d3b9f220582ebfd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The legal liability for property taxes must be considered when title to property is transferred during the taxable year. Adjustments on account of property taxes paid or accrued are frequently incorporated in agreements covering the sale of real estate, which determine the question for the individual case as between the buyer and seller. #### Accounting for Property Taxes ##### [720-30-25-3](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:e0610286ca047feaf298191c06d4443c62b93e756b6cf03c013132b9dda12204 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting questions arise as to the following: 1. a When the liability for real and personal property taxes should be recorded on the books of a taxpayer keeping his accounts on the accrual basis 2. b The amounts to be charged against the income of respective periods. ##### [720-30-25-4](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:d7145389638a09683ee03bd3126a0ee9afbba028d2ad011311e51fe8a83025ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The decision is influenced by the particular circumstances of each tax. Such terms as assessment date and levy date vary in meaning in different jurisdictions. ##### [720-30-25-5](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:741594374ce6c2f4d723865e5473aaa7877afd0e00083f1f75dc447a0d4e2454 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Determination of the liability for the tax often proceeds by degrees, with several steps being taken at appreciable time intervals. For example, while it is known that the owner of real property is liable, with respect to each tax period, for a tax on property owned on the assessment date, the amount of the tax may not be fixed until much later. ##### [720-30-25-6](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:91e1b9a41fe60fe93853beb7a81200f212a82c9f1a2d7f3bbb29d50934a6e0e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The inability to determine the exact amount of taxes is in itself no justification for failure to recognize an existing tax liability. All of the circumstances relating to a particular tax shall be considered before a satisfactory conclusion is reached. ##### [720-30-25-7](https://asc.understandingaccounting.org/asc/720/30/#720-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:19.562Z to 2026-09-10T01:08:19.562Z Record version: sha256:91f5cf3c3d83dec6f4247488d93c0e98f2d33f1bd7e2c6fe328dad3c66f233e6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Generally, the most acceptable basis of providing for property taxes is monthly accrual on the taxpayer's books during the fiscal period of the taxing authority for which the taxes are levied. The books will then show, at any closing date, the appropriate accrual or prepayment. The monthly accrual basis is practical and satisfactory so long as it is consistently followed. Source downloaded (UTC): 2026-09-10T01:08:22.956Z to 2026-09-10T01:08:22.956Z Record version: sha256:97cb2408cb90b22fb58710e2fb9f3bc7c153d03da8f19c3dc10256c5c0643f94 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/720/30/#35-subsequent-measurement) SEC content: no ##### [720-30-35-1](https://asc.understandingaccounting.org/asc/720/30/#720-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:22.956Z to 2026-09-10T01:08:22.956Z Record version: sha256:7c4a594c8b5f20384eae88fcac00a33c8b0518d1cebe5bdae1fb63acd50d0f90 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Since the liability for property taxes must frequently be estimated at the balance-sheet date, it is often necessary to adjust the provision for taxes of a prior year when their amount has been ascertained. These adjustments should ordinarily be made through the income statement, either in combination with the current year's provision or as a separate item. Source downloaded (UTC): 2026-09-10T01:08:26.720Z to 2026-09-10T01:08:26.720Z Record version: sha256:6853a1fabad3cad85aac6659077dae344ca4a82b365a735a19cfe61803a81475 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-30-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/30/#45-other-presentation-matters) SEC content: no #### Balance Sheet ##### [720-30-45-1](https://asc.understandingaccounting.org/asc/720/30/#720-30-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:26.720Z to 2026-09-10T01:08:26.720Z Record version: sha256:e60f6fc9a9bde0553be4c7888546a66462dacbc4a01d60cff88eac4a0081c786 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An accrued liability for real and personal property taxes, whether estimated or definitely known, shall be included among the current liabilities. Where estimates are subject to a substantial measure of uncertainty, the liability shall be described as estimated. #### Income Statement ##### [720-30-45-2](https://asc.understandingaccounting.org/asc/720/30/#720-30-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:26.720Z to 2026-09-10T01:08:26.720Z Record version: sha256:bed4df33e5e6a64159b22d84544f8212cee5a7e90cb2697e20a43421b4886613 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In condensed income statements appearing in published reports, the amounts of real and personal property taxes, however charged in the accounts, are rarely shown separately. They are frequently combined with other taxes but not with taxes on income. ##### [720-30-45-3](https://asc.understandingaccounting.org/asc/720/30/#720-30-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:26.720Z to 2026-09-10T01:08:26.720Z Record version: sha256:7c060e935f192b9d5b58fdad66ff403e90d206becc0714f7467a9101bedd8e41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. While it is sometimes appropriate to capitalize in property accounts the amount of real estate taxes applicable to property that is being developed for use or sale, these taxes are generally regarded as an expense of doing business. They may be accounted for in any of the following ways: 1. a Charged to operating expenses 2. b Shown as a separate deduction from income 3. c Distributed among the several accounts to which they are deemed to apply, such as factory overhead, rent income, and selling or general expenses. Source downloaded (UTC): 2026-09-10T00:48:39.704Z to 2026-09-10T00:48:53.854Z Record version: sha256:e0984f5ce61712c0be2e77c9cfded479e7295602dc79828c885440868d13b738 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35: Other Expenses — Advertising Costs ### Machine-generated study aids ```json { "summary": "ASC 720-35 governs how entities account for advertising costs in annual financial statements. The core rule: advertising costs are expensed either as incurred or the first time the advertising takes place, applied consistently as an accounting policy to similar kinds of advertising activities (720-35-25-1); no advertising asset is capitalized, though sales materials may be treated as prepaid supplies and cooperative-advertising obligations must be accrued when the related revenue is recognized. The notes must disclose the policy elected and total advertising expense for each income statement presented (720-35-50-1).", "key_points": [ "Advertising costs within scope are expensed either as incurred or the first time the advertising takes place, and the elected policy must be applied consistently to similar kinds of advertising activities (720-35-25-1).", "Deferral until the first time advertising takes place is permitted only if the advertising is expected to occur; if it is not expected to occur, the costs are expensed immediately (720-35-25-1).", "Cooperative advertising and similar obligations to reimburse customers must be accrued and the advertising cost expensed when the related revenues are recognized, if revenue precedes the expenditure (720-35-25-1A).", "Production costs are incurred during production (720-35-25-4), while communication costs (television airtime, print space) are not incurred and cannot be expensed until the item or service has been received (720-35-25-5).", "Costs to produce film or audio/video tape used to communicate advertising do not create tangible assets (720-35-25-2), but sales materials such as brochures and catalogues may be carried as prepaid supplies until no longer owned or expected to be used (720-35-25-3).", "Notes must disclose the accounting policy selected (expensed as incurred vs. first time advertising takes place) and the total advertising expense for each income statement presented (720-35-50-1).", "Scope excludes insurance direct-response advertising (944-30), interim-period advertising (270-10-45-7), advertising conducted for others under contract, specifically reimbursable indirect costs, NFP fundraising, non-advertising customer acquisition, and costs of premiums, prizes, gifts, discounts, and rebates (720-35-15-3)." ], "categories": [ "Recognition", "Subsequent measurement", "Disclosure", "Not-for-profit" ], "audience_level": "introductory", "student_note": "Exam questions hinge on the two-policy election and the timing traps: you may defer production costs until the first showing, but you can never expense communication costs (airtime, print space) before the service is received. A common misunderstanding is thinking advertising can be capitalized as an asset because of expected future benefits — under 720-35 it cannot (except as prepaid supplies for unused brochures/catalogues).", "related_topics": [ "944-30", "270-10", "340-10", "606-10", "958-720" ], "key_concepts": [ "advertising costs", "expense as incurred", "first time advertising takes place", "cooperative advertising", "production versus communication costs", "prepaid supplies", "executory contracts", "accounting policy disclosure" ] } ``` Source downloaded (UTC): 2026-09-10T00:48:39.704Z to 2026-09-10T00:48:39.704Z Record version: sha256:03b426a92a6ae0a35e3cc6f37ba91dcc6081eaf81bd9e35909d0ae92f3287350 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/35/#00-status) SEC content: no ##### [720-35-00-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:39.704Z to 2026-09-10T00:48:39.704Z Record version: sha256:459c658324d34e7a05d90857400db101a4c463a981385b80dd7db5f3f9b2c2fb 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
720-35-05-1AmendedAccounting Standards Update No. 2016-2012/21/2016
720-35-05-2SupersededAccounting Standards Update No. 2014-0905/28/2014
720-35-15-2AmendedAccounting Standards Update No. 2018-0907/16/2018
720-35-15-2AmendedAccounting Standards Update No. 2014-0905/28/2014
720-35-15-3AmendedAccounting Standards Update No. 2014-0905/28/2014
720-35-15-5SupersededAccounting Standards Update No. 2018-0907/16/2018
720-35-15-5AddedAccounting Standards Update No. 2016-2012/21/2016
720-35-25-1AmendedAccounting Standards Update No. 2018-0907/16/2018
720-35-25-1AAmendedAccounting Standards Update No. 2018-0907/16/2018
720-35-25-1AAddedAccounting Standards Update No. 2016-2012/21/2016
720-35-25-5AmendedAccounting Standards Update No. 2014-0905/28/2014
720-35-35-1AmendedAccounting Standards Update No. 2014-0905/28/2014
720-35-55-1AmendedAccounting Standards Update No. 2012-0410/01/2012
Source downloaded (UTC): 2026-09-10T00:48:41.867Z to 2026-09-10T00:48:41.867Z Record version: sha256:f4f47dc1a63b4a111c9727670a85cf90b247de416f4f33091a16a42381be0000 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/35/#05-overview-and-background) SEC content: no ##### [720-35-05-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:41.867Z to 2026-09-10T00:48:41.867Z Record version: sha256:d9bc67a3e3752b1bef09ba1f453d2058aaac3a5b27ca6dd1e76aa81d9b21667f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for annual financial statements on the following: 1. a Reporting the costs of advertising 2. b The financial statement disclosures that shall be made about advertising. ##### [720-35-05-2](https://asc.understandingaccounting.org/asc/720/35/#720-35-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:41.867Z to 2026-09-10T00:48:41.867Z Record version: sha256:8f4c1ce2c4ccd942bed7270c2bec0b7e5296b9e4ec793636828b7349dd9db9eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [720-35-05-3](https://asc.understandingaccounting.org/asc/720/35/#720-35-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:41.867Z to 2026-09-10T00:48:41.867Z Record version: sha256:2e3b1dffd9a536292f11c24811855b9df87d06c3d029e3de9ff01f96c1fffd3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are some of the reasons that costs incurred in anticipation of the probable future economic benefits of advertising generally are expensed: 1. a Financial statement preparers generally presumed that the benefit period is short. 2. b The periods during which the future economic benefits probably would be received and the amounts of such benefits could not be measured and determined easily and objectively. 3. c The advertising costs for some entities were not material. 4. d Advertising is undertaken to provide or increase future economic benefits. #### Description of Advertising ##### [720-35-05-4](https://asc.understandingaccounting.org/asc/720/35/#720-35-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:41.867Z to 2026-09-10T00:48:41.867Z Record version: sha256:e69fb72b8ee670412b70b566550f606766aec527220c72bc7f42cd03432bbad5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Advertising is the promotion of an industry, an entity, a brand, a product name, or specific products or services so as to create or stimulate a positive entity image or to create or stimulate a desire to buy the entity's products or services. Advertising generally uses a form of media—such as mail, television, radio, telephone, facsimile machine, newspaper, magazine, coupon, or billboard—to communicate with potential customers. Examples of advertising include the following: 1. a Directory and buyer's guide advertising 2. b Business and industrial publications 3. c Reprints of advertisements 4. d Television advertising 5. e Direct-mail advertising 6. f Consumer publications 7. g Radio advertisements 8. h Billboard advertisements 9. i Entity and product catalogues 10. j Cooperative advertising 11. k Booklets for sales promotion 12. l Newspaper advertising 13. m Point-of-sale material 14. n Sponsorship of public events. #### Components of Advertising Activities ##### [720-35-05-5](https://asc.understandingaccounting.org/asc/720/35/#720-35-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:41.867Z to 2026-09-10T00:48:41.867Z Record version: sha256:e6d63b06cb6515149a086aa6ea008d4939b7f56b5c924a11cee4dacd5e3a6b2c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Advertising activities may have several component costs. Two primary components are the following: 1. a The costs of producing advertisements, such as for idea development, writing advertising copy, artwork, printing, audio and video crews, actors, and other costs 2. b The costs of communicating advertisements that have been produced, such as for magazine space, television airtime, billboard space, and distribution (for example, postage stamps). Source downloaded (UTC): 2026-09-10T00:48:43.595Z to 2026-09-10T00:48:43.595Z Record version: sha256:1fdb629b2ccd8af383e162a15ca136d51b2e602d3a1dafc272ddc2d3a8455b72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/35/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [720-35-15-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:43.595Z to 2026-09-10T00:48:43.595Z Record version: sha256:4f518bdf479917abe4e8b07b00b05bb20d6eddb34d834e8669c4c906a91a0e3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities, including not-for-profit entities (NFPs). #### Transactions ##### [720-35-15-2](https://asc.understandingaccounting.org/asc/720/35/#720-35-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:43.595Z to 2026-09-10T00:48:43.595Z Record version: sha256:c901777c0c1ed9957c36b7cf6a1c03f353afb2c1168cf0c7086c3a1ff379aa72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all advertising transactions and activities, with specific exceptions noted below. ##### [720-35-15-3](https://asc.understandingaccounting.org/asc/720/35/#720-35-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:43.595Z to 2026-09-10T00:48:43.595Z Record version: sha256:bdd92bedee2d92a86fa3cb2d6d0f201a4e5a5d15b3692ff5679996b7dcf03cee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Direct-response advertising costs of an insurance entity (for guidance, see Subtopic 944-30 on insurance). 2. b Advertising costs in interim periods (for guidance, see paragraph [270-10-45-7](https://asc.understandingaccounting.org/asc/270/10/#270-10-45-7)). 3. c Costs of advertising conducted for others under contractual arrangements. 4. d Indirect costs that are specifically reimbursable under the terms of a contract. 5. e Fundraising by NFPs (however, this Subtopic does apply to advertising activities of NFPs). 6. f Customer acquisition activities, other than advertising. 7. g The costs of premiums, contest prizes, gifts, and similar promotions, as well as discounts or rebates, including those resulting from the redemption of coupons. (Other costs of coupons and similar items, such as costs of newspaper advertising space, are considered advertising costs.) ##### [720-35-15-4](https://asc.understandingaccounting.org/asc/720/35/#720-35-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:43.595Z to 2026-09-10T00:48:43.595Z Record version: sha256:72b23930df3f83d152f57d3e332d13110ec256719cca25418cdf9865b55e04f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic may or may not apply to the following transactions and activities: 1. a Some activities, such as product endorsements and sponsorships of events, which may be performed pursuant to executory contracts. Costs incurred under executory contracts generally are recognized as performance under the contract is received. Executory contracts should be evaluated to determine whether the costs recognized under such contracts are advertising costs. To the extent that those costs are advertising costs, such costs should be accounted for in conformity with the guidance in this Subtopic. ##### [720-35-15-5](https://asc.understandingaccounting.org/asc/720/35/#720-35-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:43.595Z to 2026-09-10T00:48:43.595Z Record version: sha256:ec738029e4fd7dfa4e63a91046c42124f6031676c02976bf8807a14616b10629 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-09](https://asc.understandingaccounting.org/updates/asu-2018-09/). Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:55da5c945da28d490f235b225b1ed4d3dbc47894d7d73eaf2202673367697a77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/35/#25-recognition) SEC content: no ##### [720-35-25-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:b8ba6ae370a8211846cae4981268378b455321f92421cdab58aae9f128d271fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The costs of advertising within the scope of this Subtopic shall be expensed either as incurred or the first time the advertising takes place, except for those costs described in paragraph [720-35-25-1A](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-1A). The accounting policy selected from these two alternatives shall be applied consistently to similar kinds of advertising activities. Deferring the costs of advertising until the advertising takes place assumes that the costs have been incurred for advertising that will occur. Such costs shall be expensed immediately if such advertising is not expected to occur. Examples of the first time advertising takes place include the first public showing of a television commercial for its intended purpose and the first appearance of a magazine advertisement for its intended purpose. ##### [720-35-25-1A](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-1A) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:4f008df7f6ffad0341aed5079f2c4d5eb47f5e37a196208d0f8a5db1a1caeeab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Expenditures for some advertising costs are made after recognizing revenues related to those costs. For example, some entities assume an obligation to reimburse their customers for some or all of the customers' advertising costs (cooperative advertising). When revenues related to the transactions creating those obligations are recognized before the expenditures are made, those obligations shall be accrued and the advertising costs expensed when the related revenues are recognized. #### Tangible Assets ##### [720-35-25-2](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:87d14afda7fdbe231bd8b451f083ef3ca4b43cd1e3eee8de709125d595b5fb1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of applying this Subtopic, costs incurred to produce film or audio and video tape to be used to communicate advertising do not create tangible assets. ##### [720-35-25-3](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:680973d5fdecb8921450e38f9b2c36694d1e3e112086c05fb94986d4f01f84a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Sales materials, such as brochures and catalogues, may be accounted for as prepaid supplies until they no longer are owned or expected to be used, in which case their cost would be a cost of advertising and shall be accounted for in conformity with the guidance in this Subtopic. #### Producing Advertising ##### [720-35-25-4](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:27fbb10ee50eb5b7f50c45b90df387092034bf220d9b72832f5c0f226db16ecf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of producing advertising are incurred during production rather than when the advertising takes place. #### Communicating Advertising ##### [720-35-25-5](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:eed8cf01f1e87c93f5b73e9499c9be7a739407a74c3a1c5d0b9368c0fbbb8d0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of communicating advertising are not incurred until the item or service has been received and shall not be reported as expenses before the item or service has been received. For example: 1. a The costs of television airtime shall not be reported as advertising expense before the airtime is used. Once it is used, the costs shall be expensed. 2. b The costs of magazine, directory, or other print media advertising space shall not be reported as advertising expense before the space is used. Once it is used, the costs shall be expensed. #### Executory Contracts ##### [720-35-25-6](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:46.128Z to 2026-09-10T00:48:46.128Z Record version: sha256:2091e86f38291212a8c6e88ae4ec0911979196f048398ff2789d6888eb011f40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [720-35-15-4](https://asc.understandingaccounting.org/asc/720/35/#720-35-15-4), some activities, such as product endorsements and sponsorships of events, may be performed pursuant to executory contracts. Costs incurred under executory contracts generally are recognized as performance under the contract is received. Executory contracts should be evaluated to determine whether the costs recognized under such contracts are advertising costs. To the extent that those costs are advertising costs, such costs shall be accounted for in conformity with the guidance in this Subtopic. Source downloaded (UTC): 2026-09-10T00:48:47.803Z to 2026-09-10T00:48:47.803Z Record version: sha256:37cf3806708a0bc5e1429ccd83c9fc8cdc7f327847efa410f0b4a89ac16a4175 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/720/35/#35-subsequent-measurement) SEC content: no ##### [720-35-35-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:47.803Z to 2026-09-10T00:48:47.803Z Record version: sha256:b09493ed9dee086dcd804a7336d9333b494b621aa95c9b65725ac7004a3f97c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Depreciation or amortization of a tangible asset may be a cost of advertising if the tangible asset is used for advertising. Source downloaded (UTC): 2026-09-10T00:48:50.312Z to 2026-09-10T00:48:50.312Z Record version: sha256:e993cd03c3740a1aa255a8048a4bc21c3cb1d3544dc76872d29a3b1ab3141bd7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/35/#50-disclosure) SEC content: no ##### [720-35-50-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:50.312Z to 2026-09-10T00:48:50.312Z Record version: sha256:e2789ea1b12aa411ac73802c0d49fceeb460e6277dd92fa2627c90a8bea4e199 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The notes to financial statements shall disclose both of the following: 1. a The accounting policy selected from the two alternatives in paragraph [720-35-25-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-25-1) for reporting advertising, indicating whether such costs are expensed as incurred or the first time the advertising takes place 2. b The total amount charged to advertising expense for each income statement presented. Source downloaded (UTC): 2026-09-10T00:48:51.939Z to 2026-09-10T00:48:51.939Z Record version: sha256:b387eda6b5685fde4e8a7d6f986d419873b6ef90c7b9c02cacb137014bdcc046 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-35-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/35/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [720-35-55-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:48:51.939Z to 2026-09-10T00:48:51.939Z Record version: sha256:c290c789583bc531456695f531e6324f185aba60fabd713555e0903b0788df3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance provided in paragraph [720-35-50-1](https://asc.understandingaccounting.org/asc/720/35/#720-35-50-1). - Note X. Advertising - The Entity expenses the production costs of advertising the first time the advertising takes place. For the year ended December 31, 20XX, advertising expense was $10,000,000. Source downloaded (UTC): 2026-09-10T01:08:32.175Z to 2026-09-10T01:08:46.648Z Record version: sha256:83106e45c59a9c293753f31eadb34b712e4255b6388e29675684ffe74df2abe8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40: Other Expenses — Electronic Equipment Waste Obligations ### Machine-generated study aids ```json { "summary": "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": [ "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)." ], "categories": [ "Recognition", "Subsequent measurement", "Contingencies and guarantees", "Industry-specific" ], "audience_level": "intermediate", "student_note": "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.", "related_topics": [ "410-20", "410-30", "450-20", "720-10" ], "key_concepts": [ "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" ] } ``` Source downloaded (UTC): 2026-09-10T01:08:32.175Z to 2026-09-10T01:08:32.175Z Record version: sha256:0355a9c9f9f024e4fee41d1aeb0142f7db1f254a489b5463ed06bf48d08fc437 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/40/#05-overview-and-background) SEC content: no ##### [720-40-05-1](https://asc.understandingaccounting.org/asc/720/40/#720-40-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:32.175Z to 2026-09-10T01:08:32.175Z Record version: sha256:d5b792cb127387da6d784f435bfc909fd6116fdff7f37a9f75fed5d1e440fb41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/720/40/#720-40-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:32.175Z to 2026-09-10T01:08:32.175Z Record version: sha256:00e7d6113f7cc27fc4d65f63ac1d479bc0e8cd6541cc72c3991899d571b8ab5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/720/40/#720-40-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:32.175Z to 2026-09-10T01:08:32.175Z Record version: sha256:5874b827ce974b07b1035579216ffcedf8b53f8cdb7153f71d656f17794111d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/410/20/#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](https://asc.understandingaccounting.org/asc/720/40/#720-40-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:32.175Z to 2026-09-10T01:08:32.175Z Record version: sha256:94b144a629f014f1703dd58378d790280c2aa3ecfa439225ccc5ec94cdd6aa8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. Source downloaded (UTC): 2026-09-10T01:08:35.048Z to 2026-09-10T01:08:35.048Z Record version: sha256:168ac3956a57e6c7cb256ef098d529d039a57b4886af6cab0ff56f5d56721107 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/40/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [720-40-15-1](https://asc.understandingaccounting.org/asc/720/40/#720-40-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:35.048Z to 2026-09-10T01:08:35.048Z Record version: sha256:7031cc2bf922cd18f573bfc9fd6ea240c942ab82334f3115af943775c73872a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/720/40/#720-40-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:35.048Z to 2026-09-10T01:08:35.048Z Record version: sha256:7a54052277b485142fd218e9ced7df20795cdad39ce2be37c666013fbaf232ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Historical waste from commercial users as addressed in Subtopic 410-20 2. b New waste as defined in the Directive. Source downloaded (UTC): 2026-09-10T01:08:37.268Z to 2026-09-10T01:08:37.268Z Record version: sha256:78da880e875617390a15229e7da4da26ac9803ac5c6874e676d53f0843ff133d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/40/#25-recognition) SEC content: no ##### [720-40-25-1](https://asc.understandingaccounting.org/asc/720/40/#720-40-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:37.268Z to 2026-09-10T01:08:37.268Z Record version: sha256:cf04ca77990737a1d89813ec00e65140cf540a0815317062a1d09e7e26234dd9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/720/40/#720-40-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:37.268Z to 2026-09-10T01:08:37.268Z Record version: sha256:07224d7e3cc376a819c6913776a725f8fc846e9212b02d9172693fcde5e75209 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/720/40/#720-40-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:37.268Z to 2026-09-10T01:08:37.268Z Record version: sha256:2370a92c4c706636e706382ca26122cc8d22c38b233d639c8e75d208aa892ab4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. Source downloaded (UTC): 2026-09-10T01:08:40.371Z to 2026-09-10T01:08:40.371Z Record version: sha256:555396789e09ce3a5a8208484e749ca89b315e274e7242e92386e79a86e251fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/40/#30-initial-measurement) SEC content: no ##### [720-40-30-1](https://asc.understandingaccounting.org/asc/720/40/#720-40-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:40.371Z to 2026-09-10T01:08:40.371Z Record version: sha256:75d4222606028925abdc03d9b2b931257bb873236583e6e055fd4c9540256478 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Section 720-40-25 for a discussion of measurement issues. Source downloaded (UTC): 2026-09-10T01:08:43.758Z to 2026-09-10T01:08:43.758Z Record version: sha256:9b0122df4f5fcc36326d4f2ff4d9c37f76037caee772a8add6f7688e2e630076 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/720/40/#35-subsequent-measurement) SEC content: no ##### [720-40-35-1](https://asc.understandingaccounting.org/asc/720/40/#720-40-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:43.758Z to 2026-09-10T01:08:43.758Z Record version: sha256:a2e285ba7538ca0788b0bc4c5ba016c6541dcac27328f1aae625b03dc2024efe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability shall be adjusted as actual market share and program cost information is received. Source downloaded (UTC): 2026-09-10T01:08:46.648Z to 2026-09-10T01:08:46.648Z Record version: sha256:db124a8db53fe6862be630f9ca93018566e8fe2af357b685a363e2b8d6969bd6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-40-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/40/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [720-40-55-1](https://asc.understandingaccounting.org/asc/720/40/#720-40-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:46.648Z to 2026-09-10T01:08:46.648Z Record version: sha256:f60393c027984651995fc43a770c9b11e85a5420a4f8a32c757884cc225b3afe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in Sections 720-40-25 and 720-40-35. ##### [720-40-55-2](https://asc.understandingaccounting.org/asc/720/40/#720-40-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:46.648Z to 2026-09-10T01:08:46.648Z Record version: sha256:520d2461bd1cb8ca7bf512ef2cbd34b0fa88af55360c23636c82fb7016df54a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/720/40/#720-40-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:08:46.648Z to 2026-09-10T01:08:46.648Z Record version: sha256:c6355dab6cf323b85fbca99bf1f9031ecfcfcc05f295e3a4ab43a159851d22e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. 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 Source downloaded (UTC): 2026-09-10T01:09:07.373Z to 2026-09-10T01:09:23.678Z Record version: sha256:695338e34fdbd05a6f1e98b8a83c5210a84d04628f4267ec4a14ed73c6a05f38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50: Other Expenses — Fees Paid to the Federal Government by Pharmaceutical Manufacturers and Health Insurers ### Machine-generated study aids ```json { "summary": "ASC 720-50 governs how pharmaceutical manufacturers and health insurers account for the annual, non-tax-deductible fees payable to the U.S. Treasury under the Affordable Care Act (as amended by the Health Care and Education Reconciliation Act). The entire estimated annual fee liability is recognized in full upon the first qualifying event in the calendar year (first branded prescription drug sale, or first provision of U.S. health risk insurance), with an offsetting deferred cost amortized to expense — normally straight-line — over that calendar year. The fee is presented as an operating expense.", "key_points": [ "The Acts impose annual fees on pharmaceutical manufacturers for calendar years beginning on or after January 1, 2011, and on health insurers for calendar years beginning on or after January 1, 2014; the fee is payable no later than September 30 of the applicable year and is not tax deductible (720-50-05-2).", "Each entity's share is allocated by market share: branded prescription drug sales of the preceding year for manufacturers (720-50-05-3), and net premiums written in the preceding calendar year for U.S. health risk for insurers (720-50-05-4).", "The full estimated liability is recorded upon the first qualifying sale (manufacturers) or once qualifying health insurance is provided (insurers) in the applicable calendar year, with a corresponding deferred cost (720-50-25-1).", "The deferred cost is amortized to expense straight-line over the calendar year the fee is payable, unless another method better allocates the fee (720-50-25-1).", "The health insurer fee is not an acquisition cost as defined in Subtopic 944-30 (720-50-25-1).", "The annual fee shall be presented as an operating expense (720-50-45-1).", "The guidance rests on the unique facts and circumstances of these fees; judgment is required before analogizing to other fee arrangements (720-50-15-1)." ], "categories": [ "Recognition", "Presentation", "Industry-specific", "Initial measurement" ], "audience_level": "intermediate", "student_note": "The classic trap is thinking the fee accrues ratably as sales or premiums occur — instead the entire annual liability is booked at the first qualifying sale/coverage, and it is the deferred asset (not the liability) that is amortized straight-line over the year. Also remember the fee is not tax deductible and is not an insurance acquisition cost under 944-30.", "related_topics": [ "944-30", "740", "450", "405", "720-30" ], "key_concepts": [ "annual health care reform fee", "branded prescription drug sales", "net premiums written", "deferred cost amortization", "liability recognition trigger", "operating expense presentation", "non-deductible fee", "market-share allocation" ] } ``` Source downloaded (UTC): 2026-09-10T01:09:07.373Z to 2026-09-10T01:09:07.373Z Record version: sha256:7076fc139f2e5b4a6e499b48f9919a36a42ed5f2c9836373d13157a86eb60bd7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/50/#00-status) SEC content: no ##### [720-50-00-1](https://asc.understandingaccounting.org/asc/720/50/#720-50-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:07.373Z to 2026-09-10T01:09:07.373Z Record version: sha256:0f1c4809ae0004359a369298ae410efe1d6ba71507c90ecec5d41d57468f0dce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic. - **Note:** Subtopic title changed by Accounting Standards Update No. 2011-06 on 07/21/11 from _Other Expenses—Fees Paid to the Federal Government by Pharmaceutical Manufacturers_ to _Other Expenses—Fees Paid to the Federal Government by Pharmaceutical Manufacturers and Health Insurers_.
ParagraphActionAccounting Standards UpdateDate
720-50-05-1AmendedAccounting Standards Update No. 2011-0607/21/2011
720-50-05-1AddedAccounting Standards Update No. 2010-2712/16/2010
720-50-05-2AmendedAccounting Standards Update No. 2011-0607/21/2011
720-50-05-2AddedAccounting Standards Update No. 2010-2712/16/2010
720-50-05-3AddedAccounting Standards Update No. 2011-0607/21/2011
720-50-05-4AddedAccounting Standards Update No. 2011-0607/21/2011
720-50-15-1AmendedAccounting Standards Update No. 2011-0607/21/2011
720-50-15-1AddedAccounting Standards Update No. 2010-2712/16/2010
720-50-25-1AmendedAccounting Standards Update No. 2011-0607/21/2011
720-50-25-1AddedAccounting Standards Update No. 2010-2712/16/2010
720-50-45-1AmendedAccounting Standards Update No. 2011-0607/21/2011
720-50-45-1AddedAccounting Standards Update No. 2010-2712/16/2010
720-50-65-1AddedAccounting Standards Update No. 2010-2712/16/2010
720-50-65-2AddedAccounting Standards Update No. 2011-0607/21/2011
Source downloaded (UTC): 2026-09-10T01:09:10.286Z to 2026-09-10T01:09:10.286Z Record version: sha256:cacf0fcd4a4b0831b2215bcdcf015cd2ea300c746f0c845ea13b6104792a7bd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/50/#05-overview-and-background) SEC content: no ##### [720-50-05-1](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:10.286Z to 2026-09-10T01:09:10.286Z Record version: sha256:eb865b57377fbd657af12294e2093ceb09c975d2fed14854c87b51d9f778b3a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on the annual fees paid by pharmaceutical manufacturers and health insurers to the U.S. Treasury in accordance with the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the Acts). ##### [720-50-05-2](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:10.286Z to 2026-09-10T01:09:10.286Z Record version: sha256:d764e4c5d7f3c3787f9bae838e045e9dbc9e2abc2bf691d48beaa7ff22524407 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Acts impose annual fees on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011, and on the health insurance industry for each calendar year beginning on or after January 1, 2014. An entity's portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. ##### [720-50-05-3](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:10.286Z to 2026-09-10T01:09:10.286Z Record version: sha256:06cc8d080db22fad572ae5c9e9b3e9fb36432172d4a1cacac0bc25dc25568204 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the pharmaceutical manufacturing industry, the annual fee will be allocated to individual pharmaceutical manufacturers on the basis of the amount of their branded prescription drug sales for the preceding year as a percentage of the industry's branded prescription drug sales for the same period. A pharmaceutical manufacturing entity's portion of the annual fee becomes payable to the U.S. Treasury once the entity has a gross receipt from branded prescription drug sales to any specified government program or in accordance with coverage under any government program for each calendar year beginning on or after January 1, 2011. ##### [720-50-05-4](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:10.286Z to 2026-09-10T01:09:10.286Z Record version: sha256:f3b291f0c3b8fbb90a4babd61b1d48dfb5ef4d5169ccb10f46c425599106108c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the health insurance industry, the annual fee will be allocated to individual health insurers based on the ratio of the amount of an entity's net premiums written during the preceding calendar year to the amount of health insurance for any U.S. health risk that is written during the preceding calendar year. A health insurance entity's portion of the annual fee becomes payable to the U.S. Treasury once the entity provides health insurance for any U.S. health risk for each calendar year beginning on or after January 1, 2014. Source downloaded (UTC): 2026-09-10T01:09:13.443Z to 2026-09-10T01:09:13.443Z Record version: sha256:c0504e497946999ceeb5df15c7d18ee33784c7f0fdb352168e8a0f27b19501d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/50/#15-scope-and-scope-exceptions) SEC content: no ##### [720-50-15-1](https://asc.understandingaccounting.org/asc/720/50/#720-50-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:13.443Z to 2026-09-10T01:09:13.443Z Record version: sha256:39fe07f474e8e7c459ead2164d5d1672cd4b5f90c5a7453b7f56eded34a72e08 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all pharmaceutical manufacturers and health insurers that are subject to the annual fee imposed by the Acts described in paragraphs [720-50-05-1 through 05-4](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-1) . The guidance in this Subtopic is based on the unique facts and circumstances of the fee to be paid by pharmaceutical manufacturers and health insurers in accordance with the Acts; accordingly, an entity should apply judgment when evaluating the facts and circumstances of other fee arrangements before analogizing to the guidance in this Subtopic. Source downloaded (UTC): 2026-09-10T01:09:17.233Z to 2026-09-10T01:09:17.233Z Record version: sha256:0180cd8bc23bf4fc1bfdde6c299a922b6d065f85aadbf2dfb828e6701894d7ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/50/#25-recognition) SEC content: no ##### [720-50-25-1](https://asc.understandingaccounting.org/asc/720/50/#720-50-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:17.233Z to 2026-09-10T01:09:17.233Z Record version: sha256:7f9ba2ad6da544f34c6f3e96cd2bb6bd44096b9dabd3b45ee34aea30838892ce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability related to the annual fee described in paragraphs [720-50-05-1 through 05-4](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-1) shall be estimated and recorded in full upon the first qualifying sale for pharmaceutical manufacturers or once the entity provides qualifying health insurance for health insurers in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The annual fee imposed on health insurers does not represent a cost related to the acquisition of policies that is consistent with the definition of an _acquisition cost_ in Subtopic 944-30. Source downloaded (UTC): 2026-09-10T01:09:19.889Z to 2026-09-10T01:09:19.889Z Record version: sha256:fe423645254316e477f2083883990fc8741d6322b3d6066d27702241c68f0689 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/50/#45-other-presentation-matters) SEC content: no ##### [720-50-45-1](https://asc.understandingaccounting.org/asc/720/50/#720-50-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:19.889Z to 2026-09-10T01:09:19.889Z Record version: sha256:718e2d7a09c28b1fc7cc7b65c409c13d52a4bdc42d7c64de2a0618dde5b60eaf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The annual fee described in paragraphs [720-50-05-1 through 05-4](https://asc.understandingaccounting.org/asc/720/50/#720-50-05-1) shall be presented as an operating expense. Source downloaded (UTC): 2026-09-10T01:09:23.678Z to 2026-09-10T01:09:23.678Z Record version: sha256:7fe3a95e2e153cc4bff33702c038e86adf36270083133317bb444519e50aadc5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-50-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/720/50/#65-transition-and-open-effective-date-information) SEC content: no ##### [720-50-65-1](https://asc.understandingaccounting.org/asc/720/50/#720-50-65-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:23.678Z to 2026-09-10T01:09:23.678Z Record version: sha256:6c880610d30236a8a9c91be31317633829b5d354877706957eb18fba0a79c0b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 07/14/2011 after the end of the transition period stated in Accounting Standards Update No. 2010-27, _Other Expenses (Topic 720): Fees Paid to the Federal Government by Pharmaceutical Manufacturers._ ##### [720-50-65-2](https://asc.understandingaccounting.org/asc/720/50/#720-50-65-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:23.678Z to 2026-09-10T01:09:23.678Z Record version: sha256:84dce3cd470bde75d573b9f93b77979e62a3eca976fc3c205febb82cb5bd19a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 07/02/2014 after the end of the transition period stated in Accounting Standards Update No. 2011-06, _Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers._ Source downloaded (UTC): 2026-09-10T01:09:26.801Z to 2026-09-10T01:09:37.136Z Record version: sha256:1134d8238d555e48347632a80227654ff689519d53619163340f15063e90acb2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-908: Other Expenses — Airlines ### Machine-generated study aids ```json { "summary": "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": [ "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)." ], "categories": [ "Recognition", "Industry-specific", "Inventory and PP&E" ], "audience_level": "intermediate", "student_note": "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.", "related_topics": [ "908-10", "908-360", "720-15", "360-10" ], "key_concepts": [ "route developmental costs", "preoperating costs", "expense as incurred", "overhaul costs", "direct expensing method", "rotables", "airline industry", "capitalization prohibition" ] } ``` Source downloaded (UTC): 2026-09-10T01:09:26.801Z to 2026-09-10T01:09:26.801Z Record version: sha256:a13509b8a15594796313ddb948a022cf632121d90460879071a66041f0ca1542 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-908-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/908/#00-status) SEC content: no ##### [720-908-00-1](https://asc.understandingaccounting.org/asc/720/908/#720-908-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:26.801Z to 2026-09-10T01:09:26.801Z Record version: sha256:ebb2ca258736e3c728290cc8b9ac9914f6611ab6a6f0f042c98bb1d9c5d0a198 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
908-720-25-1AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:09:28.531Z to 2026-09-10T01:09:28.531Z Record version: sha256:80a7f4d461a7312c4512036c428642ef7a058587977b96547ff318c7f3407f7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-908-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/908/#05-overview-and-background) SEC content: no ##### [720-908-05-1](https://asc.understandingaccounting.org/asc/720/908/#720-908-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:28.531Z to 2026-09-10T01:09:28.531Z Record version: sha256:dff234cd413fd60827a67129ebaae0dd6a80ee7bf73638d71afc314db19f6852 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides accounting guidance for the following costs for entities in the airline industry: 1. a [Developmental costs](https://asc.understandingaccounting.org/glossary/d/#developmental-costs "Developmental costs include those types of costs directly related to the development of new routes (or extension of existing routes), such as advertising and promotion expenses, related travel and incidental expenses, and expenses of regulatory proceedings."), including those directly related to the development of new routes 2. b [Preoperating costs](https://asc.understandingaccounting.org/glossary/p/#preoperating-costs "Preoperating costs include flight crew training, maintenance training, prerevenue flight expenses, insurance, and depreciation. Preoperating costs relate directly to specific preoperating projects, such as the preparation for operation of new routes or integration of new types of aircraft."), including initial preparation costs for a new route or new type of aircraft 3. c Overhaul costs using the direct expensing method. Source downloaded (UTC): 2026-09-10T01:09:31.012Z to 2026-09-10T01:09:31.012Z Record version: sha256:38ab6a2ddb979f24ebc3ba523b5647bcb73c63550457748620d06d94d04f4662 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-908-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/908/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-908-15-1](https://asc.understandingaccounting.org/asc/720/908/#720-908-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:31.012Z to 2026-09-10T01:09:31.012Z Record version: sha256:d760cb5deb6010257ad445e2753a1266ecbde4c1134c651ab69fce9589d92ebd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 908-10-15. Source downloaded (UTC): 2026-09-10T01:09:37.136Z to 2026-09-10T01:09:37.136Z Record version: sha256:a2ce8405724f491e03fb418f6d14e53f205c65dd44303f843ceb07b4bca8c909 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-908-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/908/#25-recognition) SEC content: no #### Developmental Costs ##### [720-908-25-1](https://asc.understandingaccounting.org/asc/720/908/#720-908-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:37.136Z to 2026-09-10T01:09:37.136Z Record version: sha256:bdd049abbda9315c07905a1dfb644dd6d5e47e04cc3eacf29d81455df1d6954c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because of the current deregulated environment and the uncertainty regarding the recoverability of route [developmental costs](https://asc.understandingaccounting.org/glossary/d/#developmental-costs "Developmental costs include those types of costs directly related to the development of new routes (or extension of existing routes), such as advertising and promotion expenses, related travel and incidental expenses, and expenses of regulatory proceedings."), 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](https://asc.understandingaccounting.org/asc/720/908/#720-908-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:37.136Z to 2026-09-10T01:09:37.136Z Record version: sha256:60df1707a0d33c4fe513858c2d37f197ef858abfecb15bed54739c5a63fa7500 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Preoperating costs](https://asc.understandingaccounting.org/glossary/p/#preoperating-costs "Preoperating costs include flight crew training, maintenance training, prerevenue flight expenses, insurance, and depreciation. Preoperating costs relate directly to specific preoperating projects, such as the preparation for operation of new routes or integration of new types of aircraft.") shall be expensed as incurred rather than capitalized. #### Overhaul Costs—Direct Expensing Method ##### [720-908-25-3](https://asc.understandingaccounting.org/asc/720/908/#720-908-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:37.136Z to 2026-09-10T01:09:37.136Z Record version: sha256:854e46f020397fe272e49e45eb804d0f203910ef1d9b31bde54b2fc22acc80e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [908-360-25-2](https://asc.understandingaccounting.org/asc/360/908/#360-908-25-2) 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](https://asc.understandingaccounting.org/asc/720/908/#720-908-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:37.136Z to 2026-09-10T01:09:37.136Z Record version: sha256:6a7b9675e764696af7a3953c56131d5965c4ce585552545bbcff16bd94e5be50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost of repairing rotables shall be charged to expense as it is incurred. See also guidance in paragraphs [908-360-35-2](https://asc.understandingaccounting.org/asc/360/908/#360-908-35-2) and [908-360-45-1](https://asc.understandingaccounting.org/asc/360/908/#360-908-45-1) concerning rotables. Source downloaded (UTC): 2026-09-10T01:09:40.397Z to 2026-09-10T01:09:54.134Z Record version: sha256:f16f62c6b1f2fd3d29ed0b224d51d3d5547e7710223a97ef553f7576cd75425b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-922: Other Expenses — Entertainment—Cable Television ### Machine-generated study aids ```json { "summary": "This Subtopic tells cable television entities which industry-specific costs must be expensed rather than capitalized. During the prematurity period (while a cable system is being built out and partially marketed), subscriber-related costs and general and administrative expenses are period costs. Costs of disconnecting/reconnecting subscribers after initial installation, and costs of unsuccessful franchise applications or abandoned franchises, are also charged to expense.", "key_points": [ "During the prematurity period, subscriber-related costs and general and administrative expenses shall be expensed as period costs (720-922-25-1).", "Accounting during the prematurity period for certain programming costs and other system costs is addressed instead in 922-350-25-1 (720-922-25-2).", "After the initial installation described in 922-360-25-7, costs incurred for disconnecting and reconnecting subscribers shall be charged to expense (720-922-25-3).", "Costs of unsuccessful franchise applications and abandoned franchises shall be charged to expense; successful franchise application costs are accounted for under 922-350-25-3 (720-922-25-4).", "The Subtopic's scope follows the cable television Overall Subtopic scope in Section 922-10-15 (720-922-15-1)." ], "categories": [ "Recognition", "Industry-specific", "Intangibles and goodwill" ], "audience_level": "intermediate", "student_note": "The exam trap is the capitalize-versus-expense line: initial hookup/installation costs and successful franchise costs may be capitalized under 922-350 and 922-360, but subscriber-related and G&A costs during the prematurity period, later disconnect/reconnect costs, and unsuccessful or abandoned franchise costs are always expensed. Students often assume all prematurity-period costs are capitalized because the system is not yet fully operating.", "related_topics": [ "922-10", "922-350", "922-360", "720-10", "350-30" ], "key_concepts": [ "prematurity period", "subscriber-related costs", "general and administrative expenses", "hookup costs", "disconnect and reconnect costs", "unsuccessful franchise application costs", "abandoned franchises", "period costs" ] } ``` Source downloaded (UTC): 2026-09-10T01:09:40.397Z to 2026-09-10T01:09:40.397Z Record version: sha256:c8bf9defdefe1d1f46c559acc7e422243e9a94ae90c4a8c5769ca9d80d9d77f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-922-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/922/#00-status) SEC content: no ##### [720-922-00-1](https://asc.understandingaccounting.org/asc/720/922/#720-922-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:40.397Z to 2026-09-10T01:09:40.397Z Record version: sha256:45ebcaadd5003226c84c449a43f24cf8b04c653dd73f33edad6154763f53d484 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. No updates have been made to this subtopic. Source downloaded (UTC): 2026-09-10T01:09:42.917Z to 2026-09-10T01:09:42.917Z Record version: sha256:23d099f7b903c1cc4cb305e765a988664d1e4a35b37e7835618c565e6bebeba2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-922-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/922/#05-overview-and-background) SEC content: no ##### [720-922-05-1](https://asc.understandingaccounting.org/asc/720/922/#720-922-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:42.917Z to 2026-09-10T01:09:42.917Z Record version: sha256:b28778f70a9365ae5489bd9abd79f3a893b6c22e94da68a9f65648f0ba73bee2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for certain costs incurred by entities in the cable television industry, such as [subscriber-related costs](https://asc.understandingaccounting.org/glossary/s/#subscriber-related-costs "Costs incurred to obtain and retain subscribers to the cable television system, including costs of billing and collection, bad debts, and mailings; repairs and maintenance of taps and connections; franchise fees related to revenues or number of subscribers; general and administrative system costs, such as salary of the system manager and office rent; programming costs for additional channels used in the marketing effort or costs related to revenues from, or number of subscribers to, per-channel or per-program service; and direct selling costs."), hookup costs, and unsuccessful franchise applications costs. Source downloaded (UTC): 2026-09-10T01:09:46.811Z to 2026-09-10T01:09:46.811Z Record version: sha256:846dbe27e9b11b491075a1edcf6b4668100b83b6ccb8de1a5f7b9e854f57c079 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-922-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/922/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-922-15-1](https://asc.understandingaccounting.org/asc/720/922/#720-922-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:46.811Z to 2026-09-10T01:09:46.811Z Record version: sha256:a5d07bf3d000f80d3c880c56cf468efbeb393c715994810c937f47f65285297c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 922-10-15. Source downloaded (UTC): 2026-09-10T01:09:54.134Z to 2026-09-10T01:09:54.134Z Record version: sha256:d8757602723482cbfb61c604fa030ad2aed317fd32ddada74179219dab2f9fae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-922-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/922/#25-recognition) SEC content: no #### Prematurity Period ##### [720-922-25-1](https://asc.understandingaccounting.org/asc/720/922/#720-922-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:54.134Z to 2026-09-10T01:09:54.134Z Record version: sha256:dc500830c305e51c3d72091c38095e9ffdd4126c1cdc0aff3b5c5555da1351eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the [prematurity period](https://asc.understandingaccounting.org/glossary/p/#prematurity-period "During the prematurity period, the cable television system is partially under construction and partially in service. The prematurity period begins when revenue from the first subscriber is recognized in accordance with Topic 606 on revenue from contracts with customers.Its end will vary with circumstances of the system but will be determined based on plans for completion of the first major construction period or achievement of a specified predetermined subscriber level at which no additional investment will be required for other than cable television plant. The construction period of a cable television system varies with the size of the franchise area, density of population, and difficulty of physical construction. The construction period is not completed until the head-end, main cable, and distribution cables are installed, and includes a reasonable time to provide for installation of subscriber drops and related hardware. During the construction period, many system operators complete installation of drops and begin to provide service to some subscribers in some parts of the system while construction continues. Providing the signal for the first time is referred to as energizing the system. The length of the prematurity period varies with the franchise development and construction plans. Such plans may consist of any of the following: Small franchise that is characterized by the absence of free television signal and a short construction period. The entire system is energized at one time near the end of the construction period. Medium-size franchise that is characterized by some direct competition from free television and by a more extensive geographical franchise area lending itself to incremental construction. Some parts of the system are energized as construction progresses. Large metropolitan franchise that is characterized by heavy direct competition from free television and fringe area signal inadequacy, high cost, and difficult construction. Many parts of the system are energized as construction progresses. Except in the smallest systems, programming is usually delivered to portions of the system and some revenues are obtained before construction of the entire system is complete. Thus, virtually every cable television system experiences a prematurity period during which it is receiving some revenue while continuing to incur substantial costs related to the establishment of the total system."), any [subscriber-related costs](https://asc.understandingaccounting.org/glossary/s/#subscriber-related-costs "Costs incurred to obtain and retain subscribers to the cable television system, including costs of billing and collection, bad debts, and mailings; repairs and maintenance of taps and connections; franchise fees related to revenues or number of subscribers; general and administrative system costs, such as salary of the system manager and office rent; programming costs for additional channels used in the marketing effort or costs related to revenues from, or number of subscribers to, per-channel or per-program service; and direct selling costs.") and general and administrative expenses shall be expensed as period costs. ##### [720-922-25-2](https://asc.understandingaccounting.org/asc/720/922/#720-922-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:54.134Z to 2026-09-10T01:09:54.134Z Record version: sha256:84eb6c4a33bfac6121046ffa95dc3c36a3b6e6035263e5d0d5ebfd85a52a0637 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on accounting during the prematurity period for certain programming costs and other system costs, see paragraph [922-350-25-1](https://asc.understandingaccounting.org/asc/350/922/#350-922-25-1). #### Hookup Costs ##### [720-922-25-3](https://asc.understandingaccounting.org/asc/720/922/#720-922-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:54.134Z to 2026-09-10T01:09:54.134Z Record version: sha256:aa8fba489da0a6d0ab79703550559d5f7b34e6c0578591a874d6ceba94c43e17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the initial installation as described in paragraph [922-360-25-7](https://asc.understandingaccounting.org/asc/360/922/#360-922-25-7), costs incurred for disconnecting and reconnecting shall be charged to expense. #### Unsuccessful Franchise Applications and Abandoned Franchises ##### [720-922-25-4](https://asc.understandingaccounting.org/asc/720/922/#720-922-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:54.134Z to 2026-09-10T01:09:54.134Z Record version: sha256:bbf69fe283893200c4826be5d30913239f34e15d6bf1d77c60fdd797c7cb9e17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of unsuccessful franchise applications and abandoned franchises shall be charged to expense. Refer to paragraph [922-350-25-3](https://asc.understandingaccounting.org/asc/350/922/#350-922-25-3) for guidance on the accounting for the costs of successful franchise applications. Source downloaded (UTC): 2026-09-10T01:09:57.559Z to 2026-09-10T01:10:03.676Z Record version: sha256:4fcf097b1bc1fd3b7a0361707dadbf09a5fc65db1d7786f90b64902519c1f9a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-924: Other Expenses — Entertainment—Casinos ### Machine-generated study aids ```json { "summary": "This Subtopic governs how a casino entity accounts for the cost of promotional allowances — complimentary goods and services (comps) such as rooms, food, beverages, and entertainment given to customers. Its single substantive rule is that the cost of providing those promotional allowances is included in costs and expenses (720-924-25-1). Scope follows the casino Overall Subtopic, Section 924-10-15.", "key_points": [ "The Subtopic addresses accounting and reporting for the cost of promotional allowances provided by a casino entity to a customer (720-924-05-1).", "Scope is the same as the casino Overall Subtopic, Section 924-10-15 (720-924-15-1).", "The cost of providing promotional allowances shall be included in costs and expenses (720-924-25-1).", "The guidance addresses the cost side of comps; it does not itself prescribe the revenue presentation of promotional allowances." ], "categories": [ "Industry-specific", "Recognition", "Presentation" ], "audience_level": "intermediate", "student_note": "Casinos give away large volumes of \"comps,\" and this rule keeps their cost in operating costs and expenses rather than netting it against gaming revenue. A common misunderstanding is confusing this cost-recognition rule with the separate revenue-side question of how (or whether) complimentaries are reported as revenue, which is addressed under the casino revenue guidance (now driven by ASC 606).", "related_topics": [ "924-10", "924-605", "606-10", "720-10" ], "key_concepts": [ "promotional allowances", "complimentaries", "casino entity", "costs and expenses", "gaming operations", "customer incentives" ] } ``` Source downloaded (UTC): 2026-09-10T01:09:57.559Z to 2026-09-10T01:09:57.559Z Record version: sha256:e1298efe4bd782ee9a96c7e814633713b775b6b174a55fa3ed4e9113f7ff67d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-924-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/924/#05-overview-and-background) SEC content: no ##### [720-924-05-1](https://asc.understandingaccounting.org/asc/720/924/#720-924-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:09:57.559Z to 2026-09-10T01:09:57.559Z Record version: sha256:0d2b5960a8af1a41acf191e14f7013fee3914169243f982699c46c5203a84154 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting and reporting for the cost of promotional allowances provided by a casino entity to a customer. Source downloaded (UTC): 2026-09-10T01:10:01.209Z to 2026-09-10T01:10:01.209Z Record version: sha256:da23391178fdaaafa9f94d68a8a7438a91f0263b51a8964d1ccbed58acb08651 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-924-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/924/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-924-15-1](https://asc.understandingaccounting.org/asc/720/924/#720-924-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:01.209Z to 2026-09-10T01:10:01.209Z Record version: sha256:0a21be41d08683f7f7f05b998397691ca11d3660091ffe65017270f0c1566389 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 924-10-15. Source downloaded (UTC): 2026-09-10T01:10:03.676Z to 2026-09-10T01:10:03.676Z Record version: sha256:27f232127ca8d84ee0440131e60336abfae3b0c7725faedcadced9ea04ac5c1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-924-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/924/#25-recognition) SEC content: no #### Promotional Allowances ##### [720-924-25-1](https://asc.understandingaccounting.org/asc/720/924/#720-924-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:03.676Z to 2026-09-10T01:10:03.676Z Record version: sha256:9dc4ce53df32b331b1e2c0573baca623830cac15284df822ec3c791c089acfe4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost of providing promotional allowances shall be included in costs and expenses. Source downloaded (UTC): 2026-09-10T01:10:05.518Z to 2026-09-10T01:10:20.638Z Record version: sha256:8b622851183258730d682fc6b17ac97b9f4fbb45efb71d8a80d734ba5c2bf494 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-926: Other Expenses — Entertainment—Films ### Machine-generated study aids ```json { "summary": "This Subtopic governs how film production and distribution entities account for certain costs incurred to develop and market a film, including overall deal costs and exploitation costs. Costs of overall deals that cannot be identified with specific projects are charged to expense as incurred over the related time period (720-926-25-1), advertising costs follow Subtopic 720-35 (720-926-25-2), and all other exploitation costs, including marketing costs, are expensed as incurred (720-926-25-3).", "key_points": [ "The Subtopic covers compensation and other costs incurred to develop and market a film, including participation costs and exploitation costs (720-926-05-1).", "Scope follows the Entertainment—Films Overall Subtopic scope in Section 926-10-15 (720-926-15-1).", "Costs of overall deal arrangements that cannot be identified with specific projects are expensed as incurred over the related time period (720-926-25-1).", "Advertising costs are accounted for under Subtopic 720-35 (720-926-25-2).", "All other exploitation costs, including marketing costs, are expensed as incurred (720-926-25-3).", "An entity must disclose its methods of accounting for exploitation costs (720-926-50-1)." ], "categories": [ "Recognition", "Disclosure", "Industry-specific" ], "audience_level": "intermediate", "student_note": "The key takeaway is that film marketing and other exploitation costs are period expenses, not capitalized film costs — a common error is assuming launch advertising can be deferred and matched against future film revenue. Note advertising is carved out to Subtopic 720-35's rules rather than governed here.", "related_topics": [ "926-10", "926-20", "720-35", "926-330" ], "key_concepts": [ "exploitation costs", "overall deal arrangements", "participation costs", "advertising costs", "marketing costs", "expense as incurred", "film production and distribution" ] } ``` Source downloaded (UTC): 2026-09-10T01:10:05.518Z to 2026-09-10T01:10:05.518Z Record version: sha256:aef8380efb8ec225d56c869ed9a970cdfdba9c45f7c06a2e07f1747bd1ff3712 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-926-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/926/#05-overview-and-background) SEC content: no ##### [720-926-05-1](https://asc.understandingaccounting.org/asc/720/926/#720-926-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:05.518Z to 2026-09-10T01:10:05.518Z Record version: sha256:a5821699a3d0f8d5b13dcd0f99d97c3e153fc6f3d6c9064bbaf53e078f91e41c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting by entities in the film production and distribution industry for certain compensation and other costs incurred to develop and [market](https://asc.understandingaccounting.org/glossary/m/#market "A distribution channel within a certain territory. Examples of markets include theatrical exhibition, home video, pay television, free television, and the licensing of film-related products.") a film. Those costs include participation and [exploitation costs](https://asc.understandingaccounting.org/glossary/e/#exploitation-costs "All direct costs (including marketing, advertising, publicity, promotion, and other distribution expenses) incurred in connection with the distribution of a film."). Source downloaded (UTC): 2026-09-10T01:10:07.999Z to 2026-09-10T01:10:07.999Z Record version: sha256:f4004f605113735972c4cf553a196115a97126dde369d7577124b8fbb3da16a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-926-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/926/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-926-15-1](https://asc.understandingaccounting.org/asc/720/926/#720-926-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:07.999Z to 2026-09-10T01:10:07.999Z Record version: sha256:3110860b957ab02fede74abba93f95a65d7b4bab18d10f02df8975516760eb7c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 926-10-15. Source downloaded (UTC): 2026-09-10T01:10:15.540Z to 2026-09-10T01:10:15.540Z Record version: sha256:70ab8c5a43097294904fc4c96ee4bd6aa56d61d6eeaa51983c0166c96b75d5b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-926-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/926/#25-recognition) SEC content: no #### Overall Deals ##### [720-926-25-1](https://asc.understandingaccounting.org/asc/720/926/#720-926-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:15.540Z to 2026-09-10T01:10:15.540Z Record version: sha256:c0594e1111310660d531277951711a67ad21d097eb980a4e0d404e54fe094644 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may enter into an [overall deal](https://asc.understandingaccounting.org/glossary/o/#overall-deal "An arrangement in which an entity compensates a producer or other creative individual for the exclusive or preferential use of that party's creative services.") arrangement. An entity shall charge the costs of overall deals that cannot be identified with specific projects to expense as they are incurred over the related time period. #### Exploitation Costs ##### [720-926-25-2](https://asc.understandingaccounting.org/asc/720/926/#720-926-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:15.540Z to 2026-09-10T01:10:15.540Z Record version: sha256:5aa4fbef6f8de8a78cc0fef8b6e890d454641341c5d8d92eb71b490b1ffbc120 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall account for advertising costs in accordance with the provisions of Subtopic 720-35. ##### [720-926-25-3](https://asc.understandingaccounting.org/asc/720/926/#720-926-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:15.540Z to 2026-09-10T01:10:15.540Z Record version: sha256:78f4685fc5c7dbe3ed5b832a6c2a519fe3bb0667f2f96350e9b18159bdfe425d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All other [exploitation costs](https://asc.understandingaccounting.org/glossary/e/#exploitation-costs "All direct costs (including marketing, advertising, publicity, promotion, and other distribution expenses) incurred in connection with the distribution of a film."), including marketing costs, shall be expensed as incurred. Source downloaded (UTC): 2026-09-10T01:10:17.987Z to 2026-09-10T01:10:17.987Z Record version: sha256:e8582e2860b7e0132cf0bb18d8f852910e5984839c224489b956b2a0562650d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-926-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/926/#50-disclosure) SEC content: no #### Exploitation Costs ##### [720-926-50-1](https://asc.understandingaccounting.org/asc/720/926/#720-926-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:17.987Z to 2026-09-10T01:10:17.987Z Record version: sha256:e1efcba2f4c21633726d5b6bfb81f3d84cb55391a7dc8c289b7627e34456d955 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose its methods of accounting for [exploitation costs](https://asc.understandingaccounting.org/glossary/e/#exploitation-costs "All direct costs (including marketing, advertising, publicity, promotion, and other distribution expenses) incurred in connection with the distribution of a film."). Source downloaded (UTC): 2026-09-10T01:10:22.861Z to 2026-09-10T01:10:30.076Z Record version: sha256:f7f264c9a91476e598c5d174c400cbee4915090153ddb9ea80dfb452f76c2c5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-928: Other Expenses — Entertainment—Music ### Machine-generated study aids ```json { "summary": "This Subtopic tells music-industry entities when to expense artist royalties, record master production costs, advance minimum guarantees paid by licensees, and other license fees. The core rule is that artist royalties (adjusted for anticipated returns) are charged to expense in the period the record sale occurs, advances are expensed as royalties are subsequently earned, and any advance or minimum guarantee that appears unrecoverable is expensed when the loss becomes evident (720-928-25-1, 720-928-25-3).", "key_points": [ "Royalties earned by artists, as adjusted for anticipated returns, are charged to expense in the period in which the sale of the record takes place (720-928-25-1).", "Advance royalties are charged to expense as subsequent royalties are earned by the artist (720-928-25-1).", "Any portion of an artist advance that subsequently appears not to be fully recoverable from future royalties is charged to expense in the period the loss becomes evident (720-928-25-1).", "The portion of record master cost borne by the record company that is not reported as an asset under 928-340-25-2 is charged to expense (720-928-25-2).", "A minimum guarantee paid in advance by a licensee that no longer appears recoverable through future use of the licensed rights is expensed to the extent nonrecoverable (720-928-25-3, referencing 928-340-35-3).", "The Subtopic follows the scope of the Overall Subtopic in Section 928-10-15 (720-928-15-1)." ], "categories": [ "Recognition", "Industry-specific", "Impairment" ], "audience_level": "intermediate", "student_note": "The trap is treating advances as permanent assets: an advance royalty or minimum guarantee is capitalized only while recoverable, and must be expensed as royalties are earned or as soon as nonrecoverability becomes evident. Pair this expense guidance with the asset-side rules in 928-340.", "related_topics": [ "928-10", "928-340", "928-405", "926", "606" ], "key_concepts": [ "artist royalties", "advance royalties", "record master costs", "minimum guarantee", "license agreements", "recoverability", "anticipated returns", "expense recognition" ] } ``` Source downloaded (UTC): 2026-09-10T01:10:22.861Z to 2026-09-10T01:10:22.861Z Record version: sha256:f9524fceb14467b80929178f5a6ec891e7f22c7c21ba54c6075cbf679db9309b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-928-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/928/#05-overview-and-background) SEC content: no ##### [720-928-05-1](https://asc.understandingaccounting.org/asc/720/928/#720-928-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:22.861Z to 2026-09-10T01:10:22.861Z Record version: sha256:80dc4657c0e3bf05e4e0020fffaa9cc2fede16f558642a0531507a67ac680938 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for accounting when an entity in the music industry expenses any of the following: 1. a [Royalties](https://asc.understandingaccounting.org/glossary/r/#royalties "Amounts paid to record producers, songwriters, or other artists for their participation in making records and to music publishers for their copyright interest in music. Amounts for artists are determined by the terms of personal service contracts negotiated between the artists and record entities and usually are determined based upon a percentage of sales activity and license fee income, adjusted for estimated sales returns. Royalties for publishing are based on the copyright or other applicable laws, but the requirements of the law may be modified by licenses issued by the publishers.") earned by artists 2. b Costs to produce [record masters](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost.") 3. c [Minimum guarantees](https://asc.understandingaccounting.org/glossary/m/#minimum-guarantee "An amount paid in advance by a licensee to a licensor for the right to sell or distribute records or music.") paid in advance by a licensee to a licensor 4. d Other fees paid under [license agreements](https://asc.understandingaccounting.org/glossary/l/#license-agreements "Contractual arrangements entered into by an owner (licensor) of a record master or music copyright with a licensee granting the licensee the right to sell or distribute records or music for a fixed fee paid to the licensor or for a fee based on sales of records or music. License agreements are modifications of the compulsory provisions of the copyright law."). Source downloaded (UTC): 2026-09-10T01:10:25.607Z to 2026-09-10T01:10:25.607Z Record version: sha256:a282a74872ab38dbbf8b6ade8503bcaf19a2ca24aafbd07e3a903a5120d9737c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-928-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/928/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-928-15-1](https://asc.understandingaccounting.org/asc/720/928/#720-928-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:25.607Z to 2026-09-10T01:10:25.607Z Record version: sha256:d295bf0f09a4bc4b587af14b74d21ef7dc37215c45a7056a910e31f9130763e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 928-10-15. Source downloaded (UTC): 2026-09-10T01:10:30.076Z to 2026-09-10T01:10:30.076Z Record version: sha256:f964e82b5185a96451c5253654d58b00d9e6ac828580b96fc27c82a20e55d52b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-928-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/928/#25-recognition) SEC content: no #### Licensor Accounting ##### [720-928-25-1](https://asc.understandingaccounting.org/asc/720/928/#720-928-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:30.076Z to 2026-09-10T01:10:30.076Z Record version: sha256:5455f871932134a622386a312d0fe10194e6ff4834d38231127d154e377ac04e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of [royalties](https://asc.understandingaccounting.org/glossary/r/#royalties "Amounts paid to record producers, songwriters, or other artists for their participation in making records and to music publishers for their copyright interest in music. Amounts for artists are determined by the terms of personal service contracts negotiated between the artists and record entities and usually are determined based upon a percentage of sales activity and license fee income, adjusted for estimated sales returns. Royalties for publishing are based on the copyright or other applicable laws, but the requirements of the law may be modified by licenses issued by the publishers.") earned by artists, as adjusted for anticipated returns, shall be charged to expense of the period in which the sale of the record takes place. [Advance royalties](https://asc.understandingaccounting.org/glossary/a/#advance-royalty "An amount paid to music publishers, record producers, songwriters, or other artists in advance of their earning royalties from record or music sales. Such an amount is based on contractual terms and is generally nonrefundable.") shall be charged to expense as subsequent royalties are earned by the artist. Any portion of such advances that subsequently appear not to be fully recoverable from future royalties to be earned by the artist shall be charged to expense during the period in which the loss becomes evident. ##### [720-928-25-2](https://asc.understandingaccounting.org/asc/720/928/#720-928-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:30.076Z to 2026-09-10T01:10:30.076Z Record version: sha256:7dbbd695e8fe0baf1d4e5af7f0d7963efa561b2ccd20a6b84b5a86c62a8addd6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The portion of the [record master](https://asc.understandingaccounting.org/glossary/r/#record-master "The master tape resulting from the performance of the artist. It is used to produce molds for commercial record production and other tapes for use in making cartridges, cassettes, DVDs, and reel tapes. The costs of producing a record master include the cost of the musical talent (musicians, vocal background, and arrangements); the cost of the technical talent for engineering, directing, and mixing; costs for the use of the equipment to record and produce the master; and studio facility charges. Under the standard type of artist contract, the record company bears a portion of the cost and recovers a portion of the cost from the artist out of designated royalties earned. However, either party may bear all or most of the cost.") cost borne by the record company not reported as an asset in accordance with paragraph [928-340-25-2](https://asc.understandingaccounting.org/asc/340/928/#340-928-25-2) shall be charged to expense. #### Licensee Accounting ##### [720-928-25-3](https://asc.understandingaccounting.org/asc/720/928/#720-928-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:30.076Z to 2026-09-10T01:10:30.076Z Record version: sha256:a0202aac5dbadfa103ddf79cb294add8a3f1f398874c012813c14357e27f58cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As described in paragraph [928-340-35-3](https://asc.understandingaccounting.org/asc/340/928/#340-928-35-3), if all or a portion of a [minimum guarantee](https://asc.understandingaccounting.org/glossary/m/#minimum-guarantee "An amount paid in advance by a licensee to a licensor for the right to sell or distribute records or music.") paid in advance by a licensee subsequently appears not to be recoverable through future use of the rights obtained under the license, the nonrecoverable portion shall be charged to expense. Source downloaded (UTC): 2026-09-10T01:10:32.559Z to 2026-09-10T01:10:47.285Z Record version: sha256:4cf6d01e282a0297fc37c6cc070f6f7b444a15eb0c5ecc7080e149eee8cfcfff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932: Other Expenses — Extractive Activities—Oil and Gas ### Machine-generated study aids ```json { "summary": "This Subtopic identifies costs unique to oil- and gas-producing activities that do not result in acquisition of an asset and therefore must be charged to expense as incurred. Under the successful efforts framework, geological and geophysical (G&G) costs, costs of carrying and retaining undeveloped properties, dry hole and bottom hole contributions, and the costs of exploratory wells (and exploratory-type stratigraphic test wells) that do not find proved reserves are expensed immediately. It also notes the customary practice of accumulating an in-house exploration department's costs and allocating them to exploration activities using standardized charges.", "key_points": [ "Costs incurred in oil- and gas-producing activities that do not result in acquisition of an asset shall be charged to expense (720-932-25-1).", "Examples of immediately expensed costs are geological and geophysical costs, costs of carrying and retaining undeveloped properties, and costs of drilling exploratory wells and exploratory-type stratigraphic test wells that do not find proved reserves (720-932-25-1).", "Geological and geophysical costs, carrying and retaining costs of undeveloped properties, and dry hole and bottom hole contributions are charged to expense when incurred (720-932-25-1).", "Carrying costs are expensed because they are incurred to maintain, not acquire, the entity's rights and do not enhance the properties' potential to contain reserves or the future benefits from the entity's assets (720-932-25-1).", "Where an entity maintains its own exploration department, its costs are customarily accumulated and allocated to exploration activities and projects using standardized charges (e.g., cost per day for a crew, cost per shot-point for seismic work, hourly rates for engineers) (720-932-30-1).", "Employment contracts with geologists or geophysicists frequently provide the employee ownership interests in leases acquired as a result of exploration (720-932-30-1).", "The scope follows that of the Overall Subtopic in Section 932-10-15 (720-932-15-1)." ], "categories": [ "Recognition", "Industry-specific", "Initial measurement" ], "audience_level": "intermediate", "student_note": "This is the expense side of the successful efforts method: the key test is whether the cost acquired an asset (proved reserves or property rights) or merely maintained/searched. Students often wrongly assume all exploration outlays can be capitalized pending outcome — G&G and carrying costs are expensed immediately regardless of later drilling success.", "related_topics": [ "932-10", "932-360", "932-235", "930-720" ], "key_concepts": [ "geological and geophysical costs", "carrying and retaining undeveloped properties", "exploratory wells", "stratigraphic test wells", "dry hole and bottom hole contributions", "successful efforts method", "expense as incurred", "exploration department cost allocation" ] } ``` Source downloaded (UTC): 2026-09-10T01:10:32.559Z to 2026-09-10T01:10:32.559Z Record version: sha256:9446fbc12ef8fab9d442d5ebfb1911db36b4751a4a4d76058d57992c84bf3599 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/932/#00-status) SEC content: no ##### [720-932-00-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:32.559Z to 2026-09-10T01:10:32.559Z Record version: sha256:4d05d67df3b57ec14b0cab0a5e880460e85f82a1e706353899486273675a8ada 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
Exploratory WellAmendedAccounting Standards Update No. 2010-0301/06/2010
ProductionAmendedAccounting Standards Update No. 2010-0301/06/2010
PropertiesAmendedAccounting Standards Update No. 2010-0301/06/2010
Stratigraphic Test WellAmendedAccounting Standards Update No. 2010-0301/06/2010
Source downloaded (UTC): 2026-09-10T01:10:36.576Z to 2026-09-10T01:10:36.576Z Record version: sha256:2fecd39c49fd882ba08f2572f3e0ccb6f9c0cf5a14cf28a69e16cde9cd10697e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/932/#05-overview-and-background) SEC content: no ##### [720-932-05-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:36.576Z to 2026-09-10T01:10:36.576Z Record version: sha256:64092eb63692f53a5d800964e63244d5d24f58194e2a89e52bc65ae873ca40d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses costs unique to the oil and gas industry that are to be expensed immediately. Source downloaded (UTC): 2026-09-10T01:10:40.202Z to 2026-09-10T01:10:40.202Z Record version: sha256:26a9e3a02071307d0e5ed2a591f245bd739c5a1d4d0314d271fbe752b9d62a44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/932/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-932-15-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:40.202Z to 2026-09-10T01:10:40.202Z Record version: sha256:6681e946692c242b5abef4118463934912afb764f5347eb08f116128c0d45c3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 932-10-15. Source downloaded (UTC): 2026-09-10T01:10:45.467Z to 2026-09-10T01:10:45.467Z Record version: sha256:0eee9222af5824a6db684e7e56e4ec2d6bcd03fed77a201a74a1203b1437f70c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/932/#25-recognition) SEC content: no ##### [720-932-25-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:45.467Z to 2026-09-10T01:10:45.467Z Record version: sha256:cae56b6aea73bdc019a0c6989c1622d6b8ec8ed59ae86b519ab5bc05fa562c92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some costs incurred in an entity's oil- and gas-producing activities do not result in acquisition of an asset and, therefore, shall be charged to expense. Examples include: 1. a Geological and geophysical costs 2. b The costs of carrying and retaining undeveloped [properties](https://asc.understandingaccounting.org/glossary/p/#properties "Mineral interests in properties (hereinafter referred to as properties), which include all of the following: Fee ownership or a lease Concession Other interest representing the legal right to produce or a revenue interest in the production of oil or gas subject to such terms as may be imposed by the conveyance of that interest. Properties also include: Royalty interests Production payments payable in oil or gas Other nonoperating interests in properties operated by others. Properties include those agreements with foreign governments or authorities under which an entity participates in the operation of the related properties or otherwise serves as producer of the underlying reserves (see paragraph 932-235-50-7); but properties do not include other supply agreements or contracts that represent the right to purchase (as opposed to extract) oil and gas. Properties are classified as proved properties or unproved properties.") 3. c The costs of drilling those [exploratory wells](https://asc.understandingaccounting.org/glossary/e/#exploratory-well "An exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, a service well , or a stratigraphic test well.") and exploratory-type [stratigraphic test wells](https://asc.understandingaccounting.org/glossary/s/#stratigraphic-test-well "A stratigraphic test is a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intention of being completed for hydrocarbon production. This classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon exploration. Stratigraphic tests are classified as exploratory-type if not drilled in a proved area or development-type if drilled in a proved area.") that do not find proved reserves. Geological and geophysical costs, costs of carrying and retaining undeveloped properties, and dry hole and bottom hole contributions shall be charged to expense when incurred. Costs of carrying and retaining undeveloped properties do not increase the potential of those properties to contain oil and gas reserves. Carrying costs are incurred to maintain an entity's rights, not to acquire those rights. In a sense, they are penalties for having delayed drilling and development activities and, thereby, having delayed potential [production](https://asc.understandingaccounting.org/glossary/p/#production "Production involves lifting the crude oil and natural gas to the surface, extracting saleable hydrocarbons, in the solid, liquid, or gaseous state from oil sands, shale, coalbeds, or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, gathering, treating, field processing (as in the case of processing gas to extract liquid hydrocarbons), and field storage. The oil and gas production function shall be regarded as ending at a terminal point, which is the outlet valve on the lease or field storage tank. If unusual physical or operational circumstances exist, it may be appropriate to regard the terminal point for the production function as: The first point at which oil, gas, or gas liquids, natural or synthetic, are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal In the case of natural resources that are intended to be upgraded into synthetic oil or gas, if those natural resources are delivered to a purchaser before upgrading, the first point at which the natural resources are delivered to a main pipeline, a common carrier, a refinery, a marine terminal, or a facility that upgrades such natural resources into synthetic oil or gas.") of oil and gas. Because carrying costs do not enhance the future benefits from the entity's properties and other assets, they are charged to expense when incurred. Source downloaded (UTC): 2026-09-10T01:10:47.285Z to 2026-09-10T01:10:47.285Z Record version: sha256:a756ec30cb74733974eb2a4131569bb6f6fb8a1f597e64f93606cb9a57f6b572 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/932/#30-initial-measurement) SEC content: no ##### [720-932-30-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:47.285Z to 2026-09-10T01:10:47.285Z Record version: sha256:af2ce9243bce4db7d2828b29857a6cbb1c36de6ecc6142e8d11b3e0bd40414cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the operating entity maintains its own [exploration](https://asc.understandingaccounting.org/glossary/e/#exploration "Exploration involves both of the following: Identifying areas that may warrant examination Examining specific areas that are considered to have prospects of containing oil and gas reserves, including drilling exploratory wells and exploratory-type stratigraphic test wells.") department, it is customary for costs of that department to be accumulated and allocated to exploration activities and projects. The allocation is based on standardized charges, such as cost per day for a crew, costs per shot-point for seismic work, hourly basis for engineers, and the like. Frequently, employment contracts with geologists or geophysicists call for the employee to receive ownership interests in leases acquired as the result of exploration. Source downloaded (UTC): 2026-09-10T01:10:51.348Z to 2026-09-10T01:11:02.039Z Record version: sha256:3f7f6554616ae6c37c7a02383c13a2b44830f2ba5bdbd0f949199efbcd2df2b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-940: Other Expenses — Financial Services—Brokers and Dealers ### Machine-generated study aids ```json { "summary": "This short subtopic addresses how brokers and dealers in securities account for mutual fund distribution costs. Its only substantive instruction is a cross-reference: for 12b-1 fees and contingent deferred sales charges, apply the cost guidance in Subtopic 946-720 (Investment Companies—Other Expenses). Its scope follows the broker-dealer Overall Subtopic scope in Section 940-10-15.", "key_points": [ "The subtopic covers accounting for mutual fund distribution costs incurred by broker-dealers (720-940-05-1).", "Scope is the same as the broker-dealer Overall Subtopic, Section 940-10-15 (720-940-15-1).", "For 12b-1 fees and deferred sales charges, the applicable cost guidance is in Subtopic 946-720 (720-940-25-1).", "The subtopic itself contains no independent recognition, measurement, or disclosure requirements beyond the cross-reference." ], "categories": [ "Industry-specific", "Recognition", "Financial statement presentation" ], "audience_level": "intermediate", "student_note": "Recognize this as a pointer subtopic, not a source of rules: if asked how a broker-dealer accounts for 12b-1 fees or deferred sales charges, the answer is found in 946-720. A common mistake is assuming 720-940 permits capitalizing distribution costs; it prescribes nothing on its own.", "related_topics": [ "946-720", "940-10", "940-20", "720-10" ], "key_concepts": [ "mutual fund distribution costs", "12b-1 fees", "deferred sales charges", "broker-dealers", "other expenses", "cross-reference guidance" ] } ``` Source downloaded (UTC): 2026-09-10T01:10:51.348Z to 2026-09-10T01:10:51.348Z Record version: sha256:f140ab8b7540976d5324c9d7747a9fd9d32f3866b429e253aed041796dd8671d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-940-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/940/#00-status) SEC content: no ##### [720-940-00-1](https://asc.understandingaccounting.org/asc/720/940/#720-940-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:51.348Z to 2026-09-10T01:10:51.348Z Record version: sha256:924d164c6e94aea0e7509ec9f4778ac812a4da75186927617ebf7a197cf2b623 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
940-720-05-1AddedAccounting Standards Update No. 2014-0905/28/2014
940-720-15-1AddedAccounting Standards Update No. 2014-0905/28/2014
940-720-25-1AddedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:10:53.777Z to 2026-09-10T01:10:53.777Z Record version: sha256:fe080d239142f4bd38457f32c0e8c274d700bce2978ddc227984a0e660b75af9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-940-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/940/#05-overview-and-background) SEC content: no ##### [720-940-05-1](https://asc.understandingaccounting.org/asc/720/940/#720-940-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:53.777Z to 2026-09-10T01:10:53.777Z Record version: sha256:6c24b499aee8f42fc98eb6747ea6e5b751c22c689a05dc81462361e90ae2a624 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting for mutual fund distribution costs for brokers and dealers in securities (broker-dealers). Source downloaded (UTC): 2026-09-10T01:10:57.257Z to 2026-09-10T01:10:57.257Z Record version: sha256:6b810d74dc8579c5b10a4c95a5f06d4f0dcca55deffb12e30cf4e4c640de758f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-940-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/940/#15-scope-and-scope-exceptions) SEC content: no ##### [720-940-15-1](https://asc.understandingaccounting.org/asc/720/940/#720-940-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:57.257Z to 2026-09-10T01:10:57.257Z Record version: sha256:dd4eb827a85d3b52d612c62e182fa8a2b7859c9aa9bbfaa5e565b2b504a50d49 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 940-10-15. Source downloaded (UTC): 2026-09-10T01:11:02.039Z to 2026-09-10T01:11:02.039Z Record version: sha256:a8d1f8c25c0914d5bcd0bd9e40b81ff8c8c184c2f1262b81ac7d74ff8b106311 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-940-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/940/#25-recognition) SEC content: no ##### [720-940-25-1](https://asc.understandingaccounting.org/asc/720/940/#720-940-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:02.039Z to 2026-09-10T01:11:02.039Z Record version: sha256:a9ded22031864efcd22bff20920094a0150eafc2a968b10ca16e0c2cdaf29fb6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. With respect to [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 deferred sales charges, see the cost guidance in Subtopic 946-720. Source downloaded (UTC): 2026-09-10T01:11:04.995Z to 2026-09-10T01:11:13.136Z Record version: sha256:3987582325974c72a09d2daae22fbdc451aa7d839f77ebbd2d58f1c2add01a65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-942: Other Expenses — Financial Services—Depository and Lending ### Machine-generated study aids ```json { "summary": "This Subtopic governs how depository institutions account for assessments imposed by the Financing Corporation (FICO) under the Deposit Insurance Funds Act of 1996, which requires institutions with deposits assessable by the Deposit Insurance Fund to help finance outstanding FICO bonds. The single rule is that the FICO assessment is reported as a period cost as incurred (720-942-25-1) rather than capitalized or accrued for future periods.", "key_points": [ "The Subtopic applies to all depository institutions that are subject to Financing Corporation assessment (720-942-15-1).", "The Deposit Insurance Funds Act of 1996 authorizes FICO to impose an assessment on institutions with deposits assessable by the Deposit Insurance Fund to share the cost of financing outstanding FICO bonds (720-942-05-2).", "A depository institution shall report the FICO assessment as a period cost as incurred (720-942-25-1).", "Because the assessment is expensed as incurred, no asset or liability is recognized for the institution's share of future FICO bond financing costs." ], "categories": [ "Recognition", "Industry-specific" ], "audience_level": "intermediate", "student_note": "A very short, single-rule industry Subtopic: the FICO assessment is simply an expense of the period incurred. The common mistake is treating the assessment as a prepaid asset or accruing the institution's share of the entire remaining FICO bond obligation instead of recognizing it period by period.", "related_topics": [ "720", "942", "942-405", "450" ], "key_concepts": [ "financing corporation assessment", "deposit insurance fund", "depository institution", "period cost", "expense as incurred", "deposit insurance funds act of 1996" ] } ``` Source downloaded (UTC): 2026-09-10T01:11:04.995Z to 2026-09-10T01:11:04.995Z Record version: sha256:fec63b0dc8bf874ebcc61e7842f7ee6a381089edab84e4d28c738b0750a473a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-942-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/942/#00-status) SEC content: no ##### [720-942-00-1](https://asc.understandingaccounting.org/asc/720/942/#720-942-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:04.995Z to 2026-09-10T01:11:04.995Z Record version: sha256:7f4130349859f2d337f26a78aabd1a4866dba3707fcaf63a34b879321a53daf9 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
942-720-05-2AmendedMaintenance Update 2014-07 (PDF)03/17/2014
Source downloaded (UTC): 2026-09-10T01:11:07.010Z to 2026-09-10T01:11:07.010Z Record version: sha256:cbfc0fb384077d09180ac86f7d6122b1f4747e064772d361c8e771149dda1f3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-942-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/942/#05-overview-and-background) SEC content: no ##### [720-942-05-1](https://asc.understandingaccounting.org/asc/720/942/#720-942-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:07.010Z to 2026-09-10T01:11:07.010Z Record version: sha256:f4c58631180eecc2ec0696e236363f4fd8f06b0117c418f58daa710d91c708a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the recognition of assessments by the Financing Corporation. ##### [720-942-05-2](https://asc.understandingaccounting.org/asc/720/942/#720-942-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:07.010Z to 2026-09-10T01:11:07.010Z Record version: sha256:106bc4efbb8e0a7a0ae08420eba41a4834124df3576947f506919c792f7c9ec7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On September 30, 1996, the Deposit Insurance Funds Act of 1996 was enacted. The Act authorizes the Financing Corporation (FICO) to impose an assessment on institutions with deposits assessable by the Deposit Insurance Fund to share in the cost of financing outstanding FICO bonds. Source downloaded (UTC): 2026-09-10T01:11:11.116Z to 2026-09-10T01:11:11.116Z Record version: sha256:d4010267db2c6a9cac9dbdba47071fc5f5be90df7b3aaf01a0a5dada7d540a4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-942-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/942/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-942-15-1](https://asc.understandingaccounting.org/asc/720/942/#720-942-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:11.116Z to 2026-09-10T01:11:11.116Z Record version: sha256:4b106d5cf625f5d23d56352f2a2a1c7e7d73c85bb52f2515361e1863a86188ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all depository institutions that are subject to Financing Corporation assessment. Source downloaded (UTC): 2026-09-10T01:11:13.136Z to 2026-09-10T01:11:13.136Z Record version: sha256:d6edc1aaedc63e59c91dde4b464ee53d34deae93cdf67c036ef268e20ffc1b67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-942-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/942/#25-recognition) SEC content: no ##### [720-942-25-1](https://asc.understandingaccounting.org/asc/720/942/#720-942-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:13.136Z to 2026-09-10T01:11:13.136Z Record version: sha256:3529043caa3aeef6c0c7570449ef74e763381e1b29f5a45471213bae14434297 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A depository institution shall report the Financing Corporation (FICO) assessment as a period cost as incurred. Source downloaded (UTC): 2026-09-10T01:11:16.270Z to 2026-09-10T01:11:38.484Z Record version: sha256:1454fb9e46ed68384a7d796f4dece3051a9f030cd2bafc44f5980cc672c9d2d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944: Other Expenses — Financial Services—Insurance ### Machine-generated study aids ```json { "summary": "ASC 944-720 tells insurance entities which costs must be expensed as incurred rather than capitalized as deferred acquisition costs. Because 944-30-25-1A permits capitalization only of incremental direct acquisition costs relating to successful contract acquisitions or renewals, everything else — non-qualifying acquisition-related costs and all indirect costs — is charged to expense as incurred (944-720-25-2).", "key_points": [ "944-720-25-2(a) requires an insurance entity to expense as incurred any acquisition-related cost that fails the capitalization criteria of 944-30-25-1A.", "944-720-25-2(b) requires an insurance entity to expense as incurred all indirect costs.", "Per 944-720-55-1, non-capitalizable acquisition-related costs include soliciting potential customers, market research, training, administration, unsuccessful acquisition or renewal efforts, and product development — except direct-response advertising capitalized under 944-30-25-1AA.", "Per 944-720-55-2, indirect costs that must be expensed include administrative costs, rent, depreciation, occupancy costs, equipment costs (including data processing equipment dedicated to acquiring insurance contracts), and other general overhead.", "The Subtopic follows the scope of 944-10-15 (944-720-15-1) and observes that sales expense structures vary — agent commissions tied to business produced, salaried branch/field personnel, or mass-marketing channels (944-720-05-2 through 05-4).", "For accounting for insurance costs by an insured (non-insurer) entity, look to Subtopic 720-20 rather than this Subtopic (944-720-60-1)." ], "categories": [ "Recognition", "Industry-specific", "Initial measurement" ], "audience_level": "intermediate", "student_note": "This is the mirror image of the DAC rules: after ASU 2010-26 only incremental direct costs of *successful* contract acquisitions may be deferred, so know the expense-as-incurred lists cold. The most common mistake is deferring costs of unsuccessful selling efforts, training, or overhead allocated to acquisition activity — only direct-response advertising meeting 944-30-25-1AA escapes immediate expensing.", "related_topics": [ "944-30", "944-10", "720-20", "944-40", "340-20" ], "key_concepts": [ "deferred acquisition costs", "successful efforts capitalization", "indirect costs", "expense as incurred", "direct-response advertising", "agent commissions", "general overhead", "insurance entity" ] } ``` Source downloaded (UTC): 2026-09-10T01:11:16.270Z to 2026-09-10T01:11:16.270Z Record version: sha256:ee1650f4828fbfa1525ccd891d7e98e0087630f6031caac1e5f5aebe7aa5e603 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/944/#00-status) SEC content: no ##### [720-944-00-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:16.270Z to 2026-09-10T01:11:16.270Z Record version: sha256:1fcdf00e992100efc194e29b1ad8da0ea91f14e8a7b9b7e8379d3e8f4bdebbf5 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
Acquisition CostsAmendedAccounting Standards Update No. 2010-2610/13/2010
944-720-25-1AmendedAccounting Standards Update No. 2010-2610/13/2010
944-720-25-2AmendedAccounting Standards Update No. 2010-2610/13/2010
944-720-55-1AmendedAccounting Standards Update No. 2014-0905/28/2014
944-720-55-1AddedAccounting Standards Update No. 2010-2610/13/2010
944-720-55-2AddedAccounting Standards Update No. 2010-2610/13/2010
Source downloaded (UTC): 2026-09-10T01:11:19.488Z to 2026-09-10T01:11:19.488Z Record version: sha256:f385b1e8af7d920ebb639ffcc4b2f0b330284026dd1dacfbb15a16fbb1ef4991 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/944/#05-overview-and-background) SEC content: no ##### [720-944-05-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:19.488Z to 2026-09-10T01:11:19.488Z Record version: sha256:83b2ec012f037776768de83bc4eb7158c9ec7318992b07e60ac2700df48fd9d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to insurance entities on accounting for and financial reporting of other expenses. ##### [720-944-05-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:19.488Z to 2026-09-10T01:11:19.488Z Record version: sha256:8ff34678129982412b8d9c47e7ab49351c77ca413438024ef02b748cf6fdef26 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In a number of life insurance entities, virtually all sales expense is composed of compensation paid to agents. Such compensation relates directly to the amount of business produced by an agent. ##### [720-944-05-3](https://asc.understandingaccounting.org/asc/720/944/#720-944-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:19.488Z to 2026-09-10T01:11:19.488Z Record version: sha256:f50851c7fb3727e297f9f4790e0419abdad90d1fa57ff0bb75768c606914d4b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In other entities, considerably less compensation will be paid to agents; however, additional sums will be paid to salaried employees, such as branch managers and employees, or to field representatives, who call on and assist the agents. ##### [720-944-05-4](https://asc.understandingaccounting.org/asc/720/944/#720-944-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:19.488Z to 2026-09-10T01:11:19.488Z Record version: sha256:9e478c1e2fd0711b7d0dbad3bf718368f60cc44da3f20521bab514461258b808 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. There are also entities that do not sell through agents. Some entities use mail, the internet, and other mass-marketing methods to sell their products. Source downloaded (UTC): 2026-09-10T01:11:23.343Z to 2026-09-10T01:11:23.343Z Record version: sha256:5b86f288b5e5c9a4007081a35e9bbfc7bb04b188e330c00c8b60c67d61110339 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/944/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-944-15-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:23.343Z to 2026-09-10T01:11:23.343Z Record version: sha256:d16de187436588f8112a8e8a6ffab370bf562adbb9bd14b81f494fc866e88025 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 944-10-15. Source downloaded (UTC): 2026-09-10T01:11:30.049Z to 2026-09-10T01:11:30.049Z Record version: sha256:efc2fbe806960afe7bfeda24a1d8a7ee565ba3f27303d06dc6a3c03b6877a163 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/944/#25-recognition) SEC content: no ##### [720-944-25-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:30.049Z to 2026-09-10T01:11:30.049Z Record version: sha256:87463ae9e9550a741cb5d75968952c580a1b7b587e03206d8ded88166f070c90 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-30-25-1A](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A) requires that an insurance entity capitalize certain [acquisition costs](https://asc.understandingaccounting.org/glossary/a/#acquisition-costs "Costs that are related directly to the successful acquisition of new or renewal insurance contracts.") directly related to successful contracts. ##### [720-944-25-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:30.049Z to 2026-09-10T01:11:30.049Z Record version: sha256:dfee5756953e8c7c9710eb6fe9ea801e4ea43131102d5a19a77cb661d9980fec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall charge to expense as incurred any of the following costs: 1. a An acquisition-related cost that cannot be capitalized in accordance with paragraph [944-30-25-1A](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A) (for implementation guidance, see paragraph [944-720-55-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-55-1)) 2. b An indirect cost (for implementation guidance, see paragraph [944-720-55-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-55-2)). Source downloaded (UTC): 2026-09-10T01:11:34.185Z to 2026-09-10T01:11:34.185Z Record version: sha256:d5fab1e7324d30c4d23a5e396ffb8f33560c460005b1001ed1cf0ea2cd5e334e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/944/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [720-944-55-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:34.185Z to 2026-09-10T01:11:34.185Z Record version: sha256:7de44a8fe7a14340c6387d05f5eb495d1880bcca41cd6fd04d049361406dc9ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance addresses paragraph [944-720-25-2(a)](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-2), which requires that an insurance entity charge to expense as incurred any acquisition-related cost that cannot be capitalized in accordance with paragraphs [944-30-25-1A through 25-1AA](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A). Such costs include costs of all of the following: 1. a Soliciting potential customers (except direct-response advertising capitalized in accordance with paragraph [944-30-25-1AA](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA)) 2. b Market research 3. c Training 4. d Administration 5. e Unsuccessful acquisition or renewal efforts (except direct-response advertising capitalized in accordance with paragraph [944-30-25-1AA](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA)) 6. f Product development. ##### [720-944-55-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:34.185Z to 2026-09-10T01:11:34.185Z Record version: sha256:83ca83e558d456498cecde9dbbd1c7643db958f0569f695a388ce830d99e2710 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance addresses paragraph [944-720-25-2(b)](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-2), which requires that an insurance entity charge to expense as incurred any indirect cost. Such costs include all of the following: 1. a Administrative costs 2. b Rent 3. c Depreciation 4. d Occupancy costs 5. e Equipment costs (including data processing equipment dedicated to acquiring insurance contracts) 6. f Other general overhead. Source downloaded (UTC): 2026-09-10T01:11:36.351Z to 2026-09-10T01:11:36.351Z Record version: sha256:79beb7843fef31fbf2e1ecbd276ca63a8840e96b17cad18d5760b91a0953f549 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-944-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/720/944/#60-relationships) SEC content: no #### Other Expenses ##### [720-944-60-1](https://asc.understandingaccounting.org/asc/720/944/#720-944-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:36.351Z to 2026-09-10T01:11:36.351Z Record version: sha256:b7a320c2e75a8d56e68cba80de670882099d6938d3f58d9c78215cd4fe5872ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on accounting for insurance costs by any insured entity, see Subtopic 720-20. 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. Source downloaded (UTC): 2026-09-10T01:11:56.550Z to 2026-09-10T01:12:06.328Z Record version: sha256:22b040b96f78a274db657f494748273b1495eacc7cd0ab82aa6ed3bc96a23f0c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-948: Other Expenses — Financial Services—Mortgage Banking ### Machine-generated study aids ```json { "summary": "This Subtopic governs how a mortgage banking enterprise accounts for fees it pays to permanent investors to assure the ultimate sale of residential or commercial loans. Such commitment fees are expensed when the loans are actually sold to the permanent investor, or earlier if it becomes evident the commitment will not be used. Because residential commitments typically cover blocks of loans, the fee is allocated to individual loan transactions on the ratio of the individual loan amount to the total commitment amount.", "key_points": [ "The Subtopic addresses accounting for residential or commercial loan commitment fees (720-948-05-1).", "Fees paid to permanent investors to ensure the ultimate sale of loans are recognized as expense when the loans are sold to the permanent investors, or when it becomes evident the commitment will not be used (720-948-25-1).", "Because residential loan commitment fees ordinarily relate to blocks of loans, amounts recognized as revenue or expense from individual loan transactions are based on the ratio of the individual loan amount to the total commitment amount (720-948-25-1).", "Scope follows the Overall Subtopic scope for mortgage banking activities in Section 948-10-15 (720-948-15-1)." ], "categories": [ "Recognition", "Industry-specific", "Financial instruments" ], "audience_level": "intermediate", "student_note": "Remember the direction of the payment: here the mortgage banker pays a fee to a permanent investor, so it is an expense deferred until the loans are sold (or the commitment lapses), not an immediate period cost. The common mistake is expensing the fee when paid rather than matching it to the loan sale, and forgetting the pro-rata allocation across the block of loans.", "related_topics": [ "948-10", "948-310", "310-20", "860" ], "key_concepts": [ "loan commitment fees", "permanent investor", "mortgage banking", "expense recognition", "block of loans allocation", "sale of loans" ] } ``` Source downloaded (UTC): 2026-09-10T01:11:56.550Z to 2026-09-10T01:11:56.550Z Record version: sha256:3e10e4333bd8eb2067aff07d98e5c16eaad65d2a00bcff98399cf9bc0a5f012d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-948-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/948/#00-status) SEC content: no ##### [720-948-00-1](https://asc.understandingaccounting.org/asc/720/948/#720-948-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:56.550Z to 2026-09-10T01:11:56.550Z Record version: sha256:7abf0230c9f62183d847384df4e60a7987a12f40183c207d46f00168b7ac7ec7 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
Permanent InvestorAddedMaintenance Update 2017-06 (PDF)04/07/2017
948-720-25-1AmendedMaintenance Update 2017-06 (PDF)04/07/2017
Source downloaded (UTC): 2026-09-10T01:11:58.690Z to 2026-09-10T01:11:58.690Z Record version: sha256:e51fda99096dca9bdd6ddc0addde832d992609ea82a127dedc7bae3834e9c17f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-948-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/948/#05-overview-and-background) SEC content: no ##### [720-948-05-1](https://asc.understandingaccounting.org/asc/720/948/#720-948-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:11:58.690Z to 2026-09-10T01:11:58.690Z Record version: sha256:21963669d6dbf7c301b6aa98c7a7a780522e7d4476c30a9d771c801d6aae2e6b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting for residential or commercial loan commitment fees. Source downloaded (UTC): 2026-09-10T01:12:01.508Z to 2026-09-10T01:12:01.508Z Record version: sha256:cf9fe9ef38230d7ed799233ed3a2046c4ba1236423283458261d5dd4948143fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-948-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/948/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-948-15-1](https://asc.understandingaccounting.org/asc/720/948/#720-948-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:01.508Z to 2026-09-10T01:12:01.508Z Record version: sha256:e3a2aa763703b9fd15602aca316175c50edcc279aed320b469129bc145cd4ea3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 948-10-15. Source downloaded (UTC): 2026-09-10T01:12:06.328Z to 2026-09-10T01:12:06.328Z Record version: sha256:799ff54cb396c37a87459be3cb6fa665ffb16836a68ed8e96cd0ce3342f09a36 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-948-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/948/#25-recognition) SEC content: no #### Residential or Commercial Loan Commitment Fees ##### [720-948-25-1](https://asc.understandingaccounting.org/asc/720/948/#720-948-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:06.328Z to 2026-09-10T01:12:06.328Z Record version: sha256:3bbc93db509f76d443768a8c4175bbac72d049a9cdb4ed2704453c02cedc9284 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Fees paid to [permanent investors](https://asc.understandingaccounting.org/glossary/p/#permanent-investor "An entity that invests in mortgage loans for its own account, for example, an insurance entity, commercial or mutual savings bank, savings and loan association, pension plan, real estate investment trust, or Federal National Mortgage Association (FNMA).") to ensure the ultimate sale of the loans (residential or commercial loan commitment fees) shall be recognized as expense when the loans are sold to permanent investors or when it becomes evident the commitment will not be used. Because residential loan commitment fees ordinarily relate to blocks of loans, fees recognized as revenue or expense as the result of individual loan transactions shall be based on the ratio of the individual loan amount to the total commitment amount. Source downloaded (UTC): 2026-09-10T01:12:09.288Z to 2026-09-10T01:12:26.241Z Record version: sha256:448f161df526035cde95288a01139c2a350586605bee8f68663aefc741b8a5fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952: Other Expenses — Franchisors ### Machine-generated study aids ```json { "summary": "ASC 720-952 was the franchisor-specific guidance on other expenses (franchise costs such as direct and indirect costs of franchise sales and continuing franchise services). Every paragraph in the subtopic has been superseded — the recognition, presentation and other guidance by Maintenance Update 2017-09 and the disclosure paragraph by ASU 2014-09 (Revenue from Contracts with Customers). As a result, the subtopic contains no operative guidance today; franchisor cost accounting is addressed under ASC 606 and ASC 340-40.", "key_points": [ "All of the scope, recognition, presentation and other-presentation-matters paragraphs (720-952-05-1, 15-1, 25-1, 25-2, 45-1) were superseded by Maintenance Update 2017-09, leaving no substantive expense guidance for franchisors in this subtopic.", "The single disclosure paragraph, 720-952-50-1, was superseded by Accounting Standards Update No. 2014-09, the revenue recognition standard.", "Because ASU 2014-09 replaced the legacy franchisor revenue and related cost model, costs of obtaining and fulfilling franchise contracts are now evaluated under ASC 340-40 and revenue under ASC 606.", "A superseded paragraph number is retained in the Codification as a placeholder; students should not cite it as current GAAP but may need it when analyzing pre-adoption financial statements." ], "categories": [ "Industry-specific", "Revenue", "Transition and effective dates", "Disclosure" ], "audience_level": "intermediate", "student_note": "This subtopic is a shell: knowing that it is fully superseded is the point, and the common mistake is citing old franchisor cost-deferral rules that ASU 2014-09 eliminated. For current franchisor accounting, go to ASC 606 for revenue and ASC 340-40 for contract costs.", "related_topics": [ "606", "340-40", "952", "952-606", "720" ], "key_concepts": [ "superseded guidance", "franchisor costs", "franchise fee revenue", "costs to obtain a contract", "costs to fulfill a contract", "industry-specific expense guidance" ] } ``` Source downloaded (UTC): 2026-09-10T01:12:09.288Z to 2026-09-10T01:12:09.288Z Record version: sha256:61c7e6fb6a149eab5d48eeeea2067bb8134d57d8b9a8e790eaef3cbf85ece42a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/952/#00-status) SEC content: no ##### [720-952-00-1](https://asc.understandingaccounting.org/asc/720/952/#720-952-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:09.288Z to 2026-09-10T01:12:09.288Z Record version: sha256:aa610ca2e900cb5e52922e9fb564eab15e7b1000cfd8f5fffd0733ceb0f0cbf3 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
Continuing Franchise FeesSupersededMaintenance Update 2017-09 (PDF)05/30/2017
ContractSupersededMaintenance Update 2017-09 (PDF)05/30/2017
ContractAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerSupersededMaintenance Update 2017-09 (PDF)05/30/2017
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
FranchisorSupersededMaintenance Update 2017-09 (PDF)05/30/2017
952-720-05-1SupersededMaintenance Update 2017-09 (PDF)05/30/2017
952-720-15-1SupersededMaintenance Update 2017-09 (PDF)05/30/2017
952-720-25-1SupersededMaintenance Update 2017-09 (PDF)05/30/2017
952-720-25-2SupersededMaintenance Update 2017-09 (PDF)05/30/2017
952-720-25-2AmendedAccounting Standards Update No. 2014-0905/28/2014
952-720-45-1SupersededMaintenance Update 2017-09 (PDF)05/30/2017
952-720-45-1AddedAccounting Standards Update No. 2014-0905/28/2014
952-720-50-1SupersededAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:12:11.869Z to 2026-09-10T01:12:11.869Z Record version: sha256:808d73a6c2d90d2bafb2d0cadebab7ab360cd1179e2f3ddc85cc9c86771b29a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/952/#05-overview-and-background) SEC content: no ##### [720-952-05-1](https://asc.understandingaccounting.org/asc/720/952/#720-952-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:11.869Z to 2026-09-10T01:12:11.869Z Record version: sha256:55e05cc77ec67e8acc586ccc366a559a7d7464b3e3b9b99dd8537d8f3eada989 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Maintenance Update 2017-09.](https://asc.understandingaccounting.org/updates/maintenance-updates-2017/) Source downloaded (UTC): 2026-09-10T01:12:13.677Z to 2026-09-10T01:12:13.677Z Record version: sha256:5d8754d18300ff5d701c112789a1c9052ab08627faeeec752fc6e8979948b802 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/952/#15-scope-and-scope-exceptions) SEC content: no ##### [720-952-15-1](https://asc.understandingaccounting.org/asc/720/952/#720-952-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:13.677Z to 2026-09-10T01:12:13.677Z Record version: sha256:bfe19dd8c79560d933538befeaa76877d7d2f8caea73ef933cdc0816d4c092a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Maintenance Update 2017-09.](https://asc.understandingaccounting.org/updates/maintenance-updates-2017/) Source downloaded (UTC): 2026-09-10T01:12:16.841Z to 2026-09-10T01:12:16.841Z Record version: sha256:bf80daccfc71ebb0d1c9b1bcb06f8014d57392beb32471eb856fa5712af96202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-20: 20 Glossary [Read section](https://asc.understandingaccounting.org/asc/720/952/#20-glossary) SEC content: no Source downloaded (UTC): 2026-09-10T01:12:18.826Z to 2026-09-10T01:12:18.826Z Record version: sha256:b0fcf9a9b0cd87fd9f26f07e3ee29072a917029a340c38b946892a7802e7822c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/952/#25-recognition) SEC content: no ##### [720-952-25-1](https://asc.understandingaccounting.org/asc/720/952/#720-952-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:18.826Z to 2026-09-10T01:12:18.826Z Record version: sha256:a10a5336901dff1ac803ed2a4ce015149abe59b465db0718fa7108e0f336826a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Maintenance Update 2017-09.](https://asc.understandingaccounting.org/updates/maintenance-updates-2017/) ##### [720-952-25-2](https://asc.understandingaccounting.org/asc/720/952/#720-952-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:18.826Z to 2026-09-10T01:12:18.826Z Record version: sha256:7506fe6f79e5f3922d61ca31c1c757eba9f4acd66471391e127e97034668fd0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Maintenance Update 2017-09.](https://asc.understandingaccounting.org/updates/maintenance-updates-2017/) Source downloaded (UTC): 2026-09-10T01:12:22.723Z to 2026-09-10T01:12:22.723Z Record version: sha256:c2776482ff0e3af45713b128cbe6689df9a814bb51290a37a49c428e78d59826 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/952/#45-other-presentation-matters) SEC content: no ##### [720-952-45-1](https://asc.understandingaccounting.org/asc/720/952/#720-952-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:22.723Z to 2026-09-10T01:12:22.723Z Record version: sha256:be2960b94116971c0648b1c52051a54a705f45399edc3eebfcf54b335d8a806b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Maintenance Update 2017-09.](https://asc.understandingaccounting.org/updates/maintenance-updates-2017/) Source downloaded (UTC): 2026-09-10T01:12:26.241Z to 2026-09-10T01:12:26.241Z Record version: sha256:ead48ecdc170705a6ca6fcd5a256b2df7884534c90e02d69131a5a8045e426f8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-952-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/952/#50-disclosure) SEC content: no ##### [720-952-50-1](https://asc.understandingaccounting.org/asc/720/952/#720-952-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:26.241Z to 2026-09-10T01:12:26.241Z Record version: sha256:35c220d27f5383c4db9b87174b5383cdaa73d436a4f6a19cb3b285928b54b40e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-10T01:12:28.117Z to 2026-09-10T01:12:54.691Z Record version: sha256:40a5dc518066bebdc691ba09e75bf971428eb623ab7de6fa47b7f56d40727256 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954: Other Expenses — Health Care Entities ### Machine-generated study aids ```json { "summary": "ASC 720-954 governs how health care entities account for insurance-related and other operating expenses, principally retrospectively rated insurance policies, claims-made policies, malpractice loss accruals, multiprovider captive insurance arrangements, and stop-loss insurance. The core rules turn on whose loss experience drives the premium: if the entity's own experience, the minimum premium is expensed over the coverage period and recoveries are deferred until estimated losses exceed the stipulated maximum premium; if a group's experience, additional premiums or refunds are accrued based on group experience to date, including asserted and unasserted, reported and unreported claims.", "key_points": [ "Under a retrospectively rated policy whose ultimate premium depends primarily on the entity's own loss experience, the minimum premium is expensed over the coverage period and insurance recoveries are not recognized until estimated losses exceed the stipulated maximum premium (720-954-25-1).", "Under a retrospectively rated policy based primarily on a group of health care entities' experience, additional premiums or refunds are accrued on the group's experience to date, including the ultimate cost of asserted and unasserted claims, reported or unreported (720-954-25-2), and the initial premium is amortized pro rata over the policy term (720-954-35-1).", "Malpractice loss accruals are based on estimated ultimate losses and the costs of settling claims, using the factors in 954-450-25-2 through 25-2A (720-954-25-3).", "A health care entity insured under a claims-made policy applies the Claims Made Contract Subsections of Subtopic 720-20 and still recognizes the estimated cost of incurred but not reported claims and incidents when probable and reasonably estimable (720-954-25-4A).", "An entity insured by an unconsolidated multiprovider captive under a group-experience retrospectively rated policy follows 954-720-25-2 but must assess whether the captive has sufficient economic substance to relieve it of further liability (720-954-35-2).", "Stop-loss insurance premiums are included in reported health care costs and stop-loss recoveries are reported as reductions of related health care costs (720-954-45-1).", "Required disclosures include the existence and accrual basis of retrospectively rated policies, insurance through a multiprovider captive with the ownership percentage and accounting method for the investment, and the nature, amounts, and effects of significant stop-loss contracts (720-954-50-1 through 50-4)." ], "categories": [ "Recognition", "Subsequent measurement", "Disclosure", "Industry-specific" ], "audience_level": "intermediate", "student_note": "The exam trap is symmetry: recoveries under an own-experience retrospectively rated policy are deferred until estimated losses exceed the stipulated maximum premium, whereas group-experience policies require accruing premiums or refunds currently based on group experience. Students also forget that buying a claims-made policy does not eliminate the need to accrue IBNR losses.", "related_topics": [ "954-450", "720-20", "954-10", "944-20", "954-720" ], "key_concepts": [ "retrospectively rated insurance policy", "stop-loss insurance", "multiprovider captive insurance entity", "claims-made policy", "incurred but not reported claims", "malpractice loss accrual", "acquisition costs", "common trust fund" ] } ``` Source downloaded (UTC): 2026-09-10T01:12:28.117Z to 2026-09-10T01:12:28.117Z Record version: sha256:05f963ebba0df59060b2c55066f361dbda0bad0fde28ea136210a1adda064df8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/954/#00-status) SEC content: no ##### [720-954-00-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:28.117Z to 2026-09-10T01:12:28.117Z Record version: sha256:5293eb9364908a4823c10027bd381cf62f0f66c5c527af652732c86ae7c10fd9 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
Prepaid Health Care ServicesSupersededAccounting Standards Update No. 2014-0905/28/2014
Stop-Loss InsuranceAddedAccounting Standards Update No. 2014-0603/14/2014
954-720-05-3AmendedAccounting Standards Update No. 2014-0603/14/2014
954-720-25-1AmendedAccounting Standards Update No. 2010-2408/27/2010
954-720-25-5AmendedAccounting Standards Update No. 2010-2408/27/2010
954-720-25-6SupersededAccounting Standards Update No. 2014-0905/28/2014
954-720-25-7SupersededAccounting Standards Update No. 2014-0905/28/2014
954-720-30-1 through 30-3SupersededAccounting Standards Update No. 2010-2408/27/2010
954-720-35-3SupersededAccounting Standards Update No. 2010-2408/27/2010
954-720-45-1AmendedAccounting Standards Update No. 2014-0603/14/2014
954-720-50-1AmendedAccounting Standards Update No. 2012-0410/01/2012
954-720-50-4AmendedAccounting Standards Update No. 2014-0603/14/2014
Source downloaded (UTC): 2026-09-10T01:12:29.956Z to 2026-09-10T01:12:29.956Z Record version: sha256:02fa26921c4f49516119fe79e61cc07835c45c2460658fe0928da20264da84e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/954/#05-overview-and-background) SEC content: no ##### [720-954-05-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:29.956Z to 2026-09-10T01:12:29.956Z Record version: sha256:d03f1c5b9d05332e6ecb2cb47d9953cec2994b80bd0b0816fc947e7989b69547 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on accounting for other expenses for health care entities within the scope of this Topic. #### Prepaid Health Care Services ##### [720-954-05-2](https://asc.understandingaccounting.org/asc/720/954/#720-954-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:29.956Z to 2026-09-10T01:12:29.956Z Record version: sha256:ad10a029f4ca6e7d0df9c5e7173327eaa2a45aed49c8f884cf08eb8c1ba34e0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many prepaid health care providers incur costs that vary with, and are primarily related to, the marketing of subscriber contracts and member enrollment. These costs, sometimes referred to as acquisition costs, consist mainly of commissions paid to agents or brokers and incentive compensation based on new enrollments. Commissions and incentive compensation may be paid when the contracts are written, at later dates, or over the terms of the contracts as premiums are received. Some providers incur additional costs directly related to the acquisition of specific contracts, such as the costs of specialized brochures, marketing, and advertising. Providers also incur costs that are related to the acquisition of new members but that do not relate to specific contracts and are not considered acquisition costs. These costs include salaries of the marketing director and staff, general marketing brochures, and general advertising and promotion expenses. #### Stop-Loss Insurance ##### [720-954-05-3](https://asc.understandingaccounting.org/asc/720/954/#720-954-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:29.956Z to 2026-09-10T01:12:29.956Z Record version: sha256:8708365a79c98a39edf2ef3860968d7ee4d7ad3edc7bf435a8bdf51eb865a6a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In [stop-loss insurance](https://asc.understandingaccounting.org/glossary/s/#stop-loss-insurance "A contract in which an entity agrees to indemnify providers for certain health care costs incurred by members."), prepaid health care providers or associated entities transfer portions of their financial risks to other entities. A provider typically contracts to recover health care costs in excess of stated amounts during the contract periods. Source downloaded (UTC): 2026-09-10T01:12:33.730Z to 2026-09-10T01:12:33.730Z Record version: sha256:87e8f861cf013f26258f853a0dc0b99da92b4f249fc807a6c02c43e9aa17cf5a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/954/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-954-15-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:33.730Z to 2026-09-10T01:12:33.730Z Record version: sha256:77fa22b7060cf666fd1fe3ecd3c9353c89a60ec21de5f3b06f2bb3d64a9c09d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 954-10-15. Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:4c291e0032ac79f5866d4931960cf5fd914596f7ffce64a5b5e4b42d77073de1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/954/#25-recognition) SEC content: no #### Retrospectively Rated Premiums ##### [720-954-25-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:c27f2ab352cf2d56696f9d932ecaf894302f545fad0242bc174b6e7e3d61c52e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A health care entity with a retrospectively rated insurance policy whose ultimate premium is based primarily on the health care entity's loss experience shall account for the minimum premium as an expense over the period of coverage under the policy. Insurance recoveries from a retrospectively rated insurance policy whose ultimate premium is based primarily on the health care entity's loss experience shall not be recognized until the estimated losses exceed the stipulated maximum premium. ##### [720-954-25-2](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:edffbbd6db5071a4d60931362faa5caacabab275eabf8f9bea01797096378dd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A health care entity insured under a retrospectively rated policy whose ultimate premium is based primarily on the experience of a group of health care entities shall accrue additional premiums or refunds on the basis of the group's experience to date, which includes a provision for the ultimate cost of asserted and unasserted claims before the financial statement date, whether reported or unreported. #### Malpractice Losses ##### [720-954-25-3](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:d425dabb10f8eb8d25035d600a4523f3c8c258daad8a7efc00a11143740b7060 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An accrual for malpractice losses shall be based on estimated ultimate losses and costs associated with settling claims. See paragraphs [954-450-25-2 through 2A](https://asc.understandingaccounting.org/asc/450/954/#450-954-25-2) for factors to consider when determining the amount of the accrual. ##### [720-954-25-4](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:441b46ded55c52a4a71a17a65a60637d25f9657b182d949650ec38f5752cdfc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Claims-Made Insurance Policies ##### [720-954-25-4A](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-4A) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:68154c5e5337834a0f79e2a8267d647e845f0992db7d425f17790065faa689b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Claims Made Contract Subsections of Subtopic 720-20 apply if a health care entity purchases a claims-made insurance policy. As discussed in paragraph [720-20-25-14](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-14), insured entities (except as discussed in Section 944-20-15), including those that use a claims-made approach for insuring certain risks, recognize a liability for the probable losses from incurred but not reported claims and incidents if the loss is both probable and reasonably estimable. Consequently, a health care entity that is insured under a claims-made insurance policy recognizes the estimated cost of claims and incidents not reported to the insurance carrier, in accordance with Subtopic 954-450. #### Trust Funds ##### [720-954-25-5](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:f76f1ea8dcfcb5a5424f36ba2803584d28542f2941b386572570df43148dce29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that participates in a common trust fund and forfeits its rights to any excess funding shall expense its contributions and account for its participation in the trust fund based on the type of coverage obtained (for example, occurrence basis, claims-made, or retrospectively rated). ##### [720-954-25-6](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:c15d18e22c53e2ed7f5ef2213b18e811b30b4c3bc2f8474c81f5f819ea8e5603 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [720-954-25-7](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:40.353Z to 2026-09-10T01:12:40.353Z Record version: sha256:f073161a5933be7b0e3b6e4159361699910a65e4d924158939bb02dbc333c7ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). Source downloaded (UTC): 2026-09-10T01:12:42.679Z to 2026-09-10T01:12:42.679Z Record version: sha256:f02833ccb23de471c1e420088849966ae4976c7e6722f2efa3d572ddbc6d6a61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/954/#30-initial-measurement) SEC content: no ##### [720-954-30-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:42.679Z to 2026-09-10T01:12:42.679Z Record version: sha256:83b600b7de894c4de10c300d1b45a2ffd91c396c0a1123d9d0d3b6fc424a7b9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraphs 954-720-30-1 through 30-3 superseded by Accounting Standards Update No. 2010-24](https://asc.understandingaccounting.org/asc/720/954/#720-954-30-1). Source downloaded (UTC): 2026-09-10T01:12:46.424Z to 2026-09-10T01:12:46.424Z Record version: sha256:ed078edc9164c9489a2cdce4a01766d1d3c770009902572cd13c8bd801a17ce7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/720/954/#35-subsequent-measurement) SEC content: no #### Retrospectively Rated Premiums ##### [720-954-35-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:46.424Z to 2026-09-10T01:12:46.424Z Record version: sha256:7e197472ad6adb93cb7f0cb930b3b5a612be72c961775726e3783ac2245f39cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A health care entity insured under a retrospectively rated policy whose ultimate premium is based primarily on the experience of a group of health care entities amortizes the initial premium to expense on a pro rata basis over the policy term. #### Medical Malpractice Claims Insured by Captive Insurance Entities ##### [720-954-35-2](https://asc.understandingaccounting.org/asc/720/954/#720-954-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:46.424Z to 2026-09-10T01:12:46.424Z Record version: sha256:9968caedb1518c95dc78ce32dc763f988baced82a0e3efa9f4d1d830f4e76dfa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A health care entity insured by an unconsolidated multiprovider captive insurance entity for medical malpractice claims under a retrospectively rated policy based primarily on the experience of a group of health care entities shall account for such insurance as indicated in paragraph [954-720-25-2](https://asc.understandingaccounting.org/asc/720/954/#720-954-25-2). However, the health care entity shall consider whether the economic substance of the multiprovider captive insurance entity is sufficient to relieve the health care entity from further liability. ##### [720-954-35-3](https://asc.understandingaccounting.org/asc/720/954/#720-954-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:46.424Z to 2026-09-10T01:12:46.424Z Record version: sha256:07c37ffdf2df25fa962985c75d4855a9b6ace9013c857ffdae9288b32ed95e9a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2010-24](https://asc.understandingaccounting.org/updates/asu-2010-24/). Source downloaded (UTC): 2026-09-10T01:12:50.085Z to 2026-09-10T01:12:50.085Z Record version: sha256:6c214e19a7958d2de55c7c0a65f4d3a0bebfd3100ca663d92436dcd30b9d415a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/954/#45-other-presentation-matters) SEC content: no #### Prepaid Health Care Services—Stop-Loss Insurance ##### [720-954-45-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:50.085Z to 2026-09-10T01:12:50.085Z Record version: sha256:4222f971e2b123fcb2c9271cd24b25db98ffea15ee0ee6178a02c7d0c15606cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Stop-loss insurance](https://asc.understandingaccounting.org/glossary/s/#stop-loss-insurance "A contract in which an entity agrees to indemnify providers for certain health care costs incurred by members.") premiums shall be included in reported health care costs. Stop-loss insurance recoveries shall be reported as reductions of related health care costs. Source downloaded (UTC): 2026-09-10T01:12:51.764Z to 2026-09-10T01:12:51.764Z Record version: sha256:f5aa319207987c895f335c738a5dfa904393d5c5e7a155e7553dc2e55de28e75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-954-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/954/#50-disclosure) SEC content: no #### Retrospectively Rated Premiums ##### [720-954-50-1](https://asc.understandingaccounting.org/asc/720/954/#720-954-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:51.764Z to 2026-09-10T01:12:51.764Z Record version: sha256:e7e07eca128363916a18025e499f149a522fc787da4fae6fbd749e66ae3a4cc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A health care entity insured under a retrospectively rated policy whose ultimate premium is based primarily on the experience of a group of health care entities shall disclose both of the following: 1. a It is insured under a retrospectively rated policy. 2. b Premiums are accrued based on the ultimate cost of the experience to date of a group of entities. #### Medical Malpractice Claims Insured by Captive Insurance Entities ##### [720-954-50-2](https://asc.understandingaccounting.org/asc/720/954/#720-954-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:51.764Z to 2026-09-10T01:12:51.764Z Record version: sha256:0a95de6ff80c7891427208b6b6877342c227beed702aea5000fd68e623785928 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The health care entity shall disclose both of the following: 1. a It is insured under a retrospectively rated policy of a multiprovider captive insurance entity. 2. b The premiums are accrued based on the captive insurance entity's experience to date. ##### [720-954-50-3](https://asc.understandingaccounting.org/asc/720/954/#720-954-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:51.764Z to 2026-09-10T01:12:51.764Z Record version: sha256:a25615ccc1db63b349d863ff11bd4b6ff390f109a0a0f7ffd9d1de1505846dff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A health care entity that is insured by a multiprovider captive insurance entity shall disclose in its financial statements: 1. a That it is insured by such an entity 2. b Its ownership percentage in the captive entity 3. c The method of accounting for its investment in, and the operations of, the captive entity. #### Prepaid Health Care Services—Stop-Loss Insurance ##### [720-954-50-4](https://asc.understandingaccounting.org/asc/720/954/#720-954-50-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:51.764Z to 2026-09-10T01:12:51.764Z Record version: sha256:3cb620b2315c4d6595a1a14394ae5b0ba252fe2985b129558d0b390129d5c3da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature, amounts, and effects of significant [stop-loss insurance](https://asc.understandingaccounting.org/glossary/s/#stop-loss-insurance "A contract in which an entity agrees to indemnify providers for certain health care costs incurred by members.") contracts shall be disclosed. Source downloaded (UTC): 2026-09-10T01:12:58.744Z to 2026-09-10T01:13:26.933Z Record version: sha256:40a7cc616233b1442f0332c9302595ce1441d284f2a5089af20741dd5fde63df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958: Other Expenses — Not-for-Profit Entities ### Machine-generated study aids ```json { "summary": "ASC 720-958 (cross-referenced as 958-720) governs how not-for-profit entities report expenses: by functional classification (program services and supporting activities such as management and general, fundraising, and membership development) and by natural classification, with a required analysis linking the two. It also sets the purpose/audience/content criteria that must all be met before joint costs of an activity that includes fundraising may be allocated to program or management and general rather than charged entirely to fundraising, and requires a recipient NFP to recognize services received from personnel of an affiliate that the affiliate does not charge for.", "key_points": [ "An NFP must report information about all expenses in one location—on the face of the statement of activities, in a note schedule, or in a separate statement—in an analysis that disaggregates functional expense classifications by natural classifications such as salaries, rent, interest, and depreciation (958-720-45-15).", "Costs of fundraising activities, including special fundraising events and direct-response solicitations that will generate future contributions, are expensed as incurred (958-720-25-4); fundraising by NFPs is not advertising (958-720-25-5).", "Costs representing direct conduct or direct supervision of program or other supporting activities must be allocated out of management and general, and shared costs such as information technology are allocated among the functions receiving direct benefit (958-720-45-2A; 958-720-45-8).", "For joint activities, if the purpose, audience, and content criteria are all met, identifiable costs are charged to their function and joint costs are allocated between fundraising and program or management and general; if any criterion fails, all costs are charged to fundraising except costs of goods or services provided in exchange transactions such as direct donor benefits (958-720-45-29).", "The purpose criterion requires a call for specific action by the audience that helps accomplish the mission (educating the public about causes or asking for contributions is not enough) and is tested in order: compensation or fees test, separate and similar activities test, then other evidence test (958-720-45-33 through 45-47).", "A rebuttable presumption exists that the audience criterion is not met if the audience includes prior donors or is selected based on ability or likelihood to contribute; it is overcome only if the audience is also selected for the reasons in 958-720-45-49 (958-720-45-48).", "Services received from personnel of an affiliate that the affiliate does not charge for must be recognized and measured at the affiliate's cost (including direct personnel costs), with an election to use fair value if cost would significantly over- or understate the service, and may not be presented as a contra-expense or contra-asset (958-720-25-9; 30-2; 30-3; 45-56)." ], "categories": [ "Not-for-profit", "Presentation", "Disclosure", "Financial statement presentation" ], "audience_level": "intermediate", "student_note": "Exam questions almost always hinge on the joint-cost allocation gate: all three criteria (purpose, audience, content) must be met or 100% of the activity's cost is charged to fundraising. The most common misunderstanding is thinking \"educating the public about causes\" counts as a program call to action—it does not; the message must ask the audience to take a specific mission-advancing action, and disclosure of allocated joint costs is mandatory.", "related_topics": [ "958-205", "958-220", "958-605", "720-35", "720-25", "850-10" ], "key_concepts": [ "functional expense classification", "natural expense classification", "joint costs", "purpose audience and content criteria", "fundraising expense", "management and general activities", "services received from personnel of an affiliate", "program services" ] } ``` Source downloaded (UTC): 2026-09-10T01:12:58.744Z to 2026-09-10T01:12:58.744Z Record version: sha256:ca1d7d41493709e546ea0c13be621d959fee513dbc8d27f7a4db8494f75ed351 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/958/#00-status) SEC content: no ##### [720-958-00-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:12:58.744Z to 2026-09-10T01:12:58.744Z Record version: sha256:e0578c087a3c363c82613ac3a086220e5b96f7b22188912f39f8f6a1ed31022b 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
AffiliateAmendedMaintenance Update 2018-12 (PDF)09/10/2018
AffiliateAddedAccounting Standards Update No. 2013-0604/19/2013
Conditional ContributionAddedAccounting Standards Update No. 2018-0806/21/2018
ContributionAmendedAccounting Standards Update No. 2018-0806/21/2018
ContributionAmendedAccounting Standards Update No. 2010-0701/28/2010
Donor-Imposed ConditionAddedAccounting Standards Update No. 2018-0806/21/2018
Functional ClassificationSupersededAccounting Standards Update No. 2016-1408/18/2016
Functional Expense ClassificationAddedAccounting Standards Update No. 2016-1408/18/2016
Management and General ActivitiesAmendedAccounting Standards Update No. 2016-1408/18/2016
Natural Expense ClassificationAmendedAccounting Standards Update No. 2024-0311/04/2024
Natural Expense ClassificationAmendedAccounting Standards Update No. 2016-1408/18/2016
Natural Expense ClassificationAddedAccounting Standards Update No. 2014-0603/14/2014
Unconditional Promise to GiveSupersededAccounting Standards Update No. 2018-0806/21/2018
958-720-05-1AmendedAccounting Standards Update No. 2013-0604/19/2013
958-720-05-7AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-15-6 through 15-8
AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-25-1AmendedAccounting Standards Update No. 2018-0806/21/2018
958-720-25-2SupersededAccounting Standards Update No. 2018-0806/21/2018
958-720-25-5AmendedAccounting Standards Update No. 2014-0905/28/2014
958-720-25-6SupersededAccounting Standards Update No. 2014-0905/28/2014
958-720-25-8SupersededAccounting Standards Update No. 2014-0905/28/2014
958-720-25-9AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-30-1AmendedAccounting Standards Update No. 2018-0806/21/2018
958-720-30-2AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-30-3AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-45-1 through 45-3
AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-45-2AmendedMaintenance Update 2020-18 (PDF)11/25/2020
958-720-45-2AmendedMaintenance Update 2015-11 (PDF)06/19/2015
958-720-45-2AAddedAccounting Standards Update No. 2016-1408/18/2016
958-720-45-7AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-45-7AmendedAccounting Standards Update No. 2012-0410/01/2012
958-720-45-8AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-45-13AmendedAccounting Standards Update No. 2012-0410/01/2012
958-720-45-14AmendedAccounting Standards Update No. 2012-0410/01/2012
958-720-45-15AmendedAccounting Standards Update No. 2018-0907/16/2018
958-720-45-15AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-45-15AmendedAccounting Standards Update No. 2014-0603/14/2014
958-720-45-16SupersededAccounting Standards Update No. 2016-1408/18/2016
958-720-45-16AmendedAccounting Standards Update No. 2014-0603/14/2014
958-720-45-23AmendedMaintenance Update 2018-12 (PDF)09/10/2018
958-720-45-56AmendedAccounting Standards Update No. 2020-1010/29/2020
958-720-45-56AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-50-1AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-50-3AddedAccounting Standards Update No. 2013-0604/19/2013
958-720-55-1SupersededAccounting Standards Update No. 2018-0806/21/2018
958-720-55-1AAddedAccounting Standards Update No. 2018-0806/21/2018
958-720-55-1BAddedAccounting Standards Update No. 2018-0806/21/2018
958-720-55-166AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-55-169AmendedAccounting Standards Update No. 2016-1408/18/2016
958-720-55-171 through 55-176
AddedAccounting Standards Update No. 2016-1408/18/2016
958-720-65-1AddedAccounting Standards Update No. 2013-0604/19/2013
Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:7a88cb4352b4a16f4ed6f1fd8bfba1ba43b633a6e8f5a5692cde1d961eeae973 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/958/#05-overview-and-background) SEC content: no ##### [720-958-05-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:d7018b36b358c6ed983aac1642c4329895255ae6cb731611533560a50a8c208e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on reporting expenses for [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs). The guidance in this Subtopic is presented in the following three Subsections: 1. a General 2. b Accounting for Costs of Activities that Include Fundraising 3. c Services Received from Personnel of an Affiliate. ##### [720-958-05-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:3fe8a25bb98f8a9669e5cca899980d06dd6668e94ea7326cb85005918124ba67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsections provide incremental guidance on the following subjects: 1. a The functional classification of expenses 2. b The natural classification of expenses 3. c [Contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") made 4. d Fundraising costs 5. e Premium costs 6. f Advertising costs 7. g Reductions in amounts charged for goods and services (discounts) 8. h Cost of sales 9. i Costs of occupancy and maintenance 10. j Interest costs 11. k Payments to affiliated NFPs 12. l Expenses of federated fundraising organizations. ##### [720-958-05-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:807f7652ae7b4989cf61ecd0ab7ae05b78577cd61f4127b227b8f2d5a841cd73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For additional information about the presentation of expenses in a statement of activities, see Section 958-220-45. ##### [720-958-05-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:5b95f63fb1ab10a455df65ff15c5e42b6bdd43e16717007e8f10105f2c37cc3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An NFP produces and distributes goods and services by using resources. It obtains some of the resources it uses by paying cash, some by incurring liabilities, and some by contribution. Some of its resources (assets) are used up in providing services at the time they are received, others are used up at a later date, and still others are used up gradually over time. Using up assets in providing services (or otherwise) has a cost whether those assets have been acquired in prior periods or in the current period and whether acquired by paying cash, incurring liabilities, or by contribution. To help explain the relationships of an NFP's ongoing major or central operations and activities, a statement of activities shall report the gross amounts of revenues and expenses pursuant to paragraph [958-220-45-14](https://asc.understandingaccounting.org/asc/220/958/#220-958-45-14). To help donors, creditors, and others in assessing an NFP's service efforts, including the costs of its services and how it uses resources, a statement of activities or notes to financial statements shall provide information about expenses reported by their functional classification such as major classes of [program services](https://asc.understandingaccounting.org/glossary/p/#program-services "The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the not-for-profit entity (NFP) exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.") and [supporting activities](https://asc.understandingaccounting.org/glossary/s/#supporting-activities "Supporting activities are all activities of a not-for-profit entity (NFP) other than program services. Generally, they include the following: Management and general activities Fundraising activities Membership development activities."). ### Accounting for Costs of Activities that Include Fundraising ##### [720-958-05-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:5aaeadf93abe677c2954c22119b41cec58c9d98dd03b327fed3b7f3d1aaeeab6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Accounting for Costs of Activities that Include Fundraising Subsections provide guidance for reporting costs as program or management and general in circumstances in which those [activities](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial.") are combined with [fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time."). Some [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs) solicit support through a variety of fundraising activities, including the following: 1. a Direct mail 2. b Telephone solicitation 3. c Door-to-door canvassing 4. d Telethons 5. e Special events 6. f Others. Sometimes fundraising activities are conducted with activities related to other functions, such as program activities or supporting services, such as [management and general activities](https://asc.understandingaccounting.org/glossary/m/#management-and-general-activities "Supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities."). Sometimes fundraising activities include components that would otherwise be associated with program or supporting services, but in fact support fundraising. The Accounting for Costs of Activities that Include Fundraising Subsections establish financial accounting standards for accounting for costs of those joint activities and require financial statement disclosures about the nature of the activities for which [joint costs](https://asc.understandingaccounting.org/glossary/j/#joint-costs "The costs of conducting joint activities that are not identifiable with a particular component of the activity. For example, the cost of postage for a letter that includes both fundraising and program components is a joint cost. Joint costs may include the following costs: Salaries Contract labor Consultants Professional fees Paper Printing Postage Event advertising Telephones Airtime Facility rentals.") have been allocated and the amounts of joint costs. ##### [720-958-05-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:fc24c20acfb576b0ea909aab9eeb6add5e4176bd2a2d20bd8dc0360c9abfc4ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The functional classifications of fundraising, program, and management and general are discussed throughout the Accounting for Costs of Activities that Include Fundraising Subsections for purposes of illustrating how the guidance in these Subsections would be applied by NFPs that use those functional classifications. Some entities have a functional structure that does not include fundraising, program, or management and general, or that includes other functional classifications, such as membership development. Use of those functional classifications is not intended to require reporting the functional classifications of fundraising, program, and management and general. ### Services Received from Personnel of an Affiliate ##### [720-958-05-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:997858e94ba702b7127c7b9eaf4278fbd1a84ab3b1304b12365b9a55daa1af98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Services Received from Personnel of an Affiliate Subsections provide guidance for reporting services received by a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") that directly benefit the recipient NFP and for which the affiliate does not charge the recipient NFP. Charging the recipient NFP means requiring payment from the recipient NFP at least for the approximate amount of the direct personnel costs (for example, compensation and any payroll-related fringe benefits) incurred by the affiliate in providing a service to the recipient NFP or the approximate fair value of that service. Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:77492de3c92ba64acdf92b7508b3997f1d12abad60c75db7adc03de4d3730fe7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/958/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-958-15-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:101b7eeadcfc2f6ea2fd2c3b6b30b9f5afa082cb9d01cac4a1b16c4cb5c68df2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 958-10-15. ##### [720-958-15-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:d6ecf34d6b65a9f29e8d88e872cc3fd483f50ba1d13f2c1f262616e63c0575f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsection of this Section establishes the pervasive scope for this Subtopic, with specific exceptions noted in the other Subsections of this Section. ### Accounting for Costs of Activities that Include Fundraising ##### [720-958-15-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:6267ae528ce701645248a9fe29fafe84b042060df4cb4e94436efe3491fd84ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Accounting for Costs of Activities that Include Fundraising Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [958-720-15-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-1), with specific exceptions noted below. #### Entities ##### [720-958-15-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:c0aa01323acc93a06d034e80604cb53cebf74c25b282dca85e9c3d07b7ec79fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Accounting for Costs of Activities that Include Fundraising Subsections applies to all [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs) that solicit [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution."). #### Transactions ##### [720-958-15-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:062e056e907e3505ad58d35bb36444f3a2d71284bcfa418c93f565a3f7ade4f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Accounting for Costs of Activities that Include Fundraising Subsections applies only to [costs of joint activities](https://asc.understandingaccounting.org/glossary/c/#costs-of-joint-activities "Costs incurred for a joint activity. Costs of joint activities may include joint costs and costs other than joint costs. Costs other than joint costs are costs that are identifiable with a particular function, such as fundraising, program, management and general, and cost of sales. For example, some costs incurred for printing, paper, professional fees, and salaries to produce donor cards are not joint costs, although they may be incurred in connection with conducting joint activities."). The guidance does not address allocations of costs in other circumstances. ### Services Received from Personnel of an Affiliate #### Overall Guidance ##### [720-958-15-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:42234c755c385e790b7c45f31541260feb844937d285317e7aa5ad9cf2a36ec9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Services Received from Personnel of an Affiliate Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsections of this Subtopic, see paragraph [958-720-15-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-1), with specific exceptions noted below. #### Entities ##### [720-958-15-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:0a45c641381259dfbd88724b3b612d2816f78f3662bbc7ec249f1b09fb79490f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Services Received from Personnel of an Affiliate Subsections applies to all [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs) that receive services from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") that directly benefit the recipient NFP and for which the affiliate does not charge the recipient NFP. #### Transactions ##### [720-958-15-8](https://asc.understandingaccounting.org/asc/720/958/#720-958-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:02.797Z to 2026-09-10T01:13:02.797Z Record version: sha256:2fb27f5cf30ad7c4c383372f098ed29bd181b0eaccaaf9425fd8528a099cfeec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Services Received from Personnel of an Affiliate Subsections applies to services received from personnel of an affiliate that directly benefit the recipient NFP and for which the affiliate does not charge the recipient NFP. Charging the recipient NFP means requiring payment from the recipient NFP at least for the approximate amount of the direct personnel costs (for example, compensation and any payroll-related fringe benefits) incurred by the affiliate in providing a service to the recipient NFP or the approximate fair value of that service. The guidance does not address transactions between affiliates for which the affiliate charges the recipient NFP at least for the approximate amount of direct personnel costs or the approximate fair value of the services provided. Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:8457f605a1c36127d084a8fc79924adf44946cb2d80afe5aa7c4b99a636a5bb1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/958/#25-recognition) SEC content: no #### Contributions Made ##### [720-958-25-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:1c51ef3ce0d6eb2f205dd4c6fa9c754557c97008572439aa0808f6dadbce85ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) shall comply with the applicable guidance in Subtopic 720-25, as well as the following guidance. For guidance on promises to give, see Subtopic 958-405 on not-for-profit entities—liabilities. ##### [720-958-25-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:217e4540adace6a6d1b8dd3808a6155afe92b4fc50d243fc575284426089da63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-08](https://asc.understandingaccounting.org/updates/asu-2018-08/). ##### [720-958-25-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:faa73d8097e2b1dc12e28981e7da927326d01cb48863d24dcfa7d17f66c0e5ce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an NFP makes [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") or awards grants to other NFPs upon specific requests of others, the NFP may be acting as an [agent](https://asc.understandingaccounting.org/glossary/a/#agent "An entity that acts for and on behalf of another. Although the term agency has a legal definition, the term is used broadly to encompass not only legal agency, but also the relationships described in Topic 958. A recipient entity acts as an agent for and on behalf of a donor if it receives assets from the donor and agrees to use those assets on behalf of or transfer those assets, the return on investment of those assets, or both to a specified beneficiary. A recipient entity acts as an agent for and on behalf of a beneficiary if it agrees to solicit assets from potential donors specifically for the beneficiary's use and to distribute those assets to the beneficiary. A recipient entity also acts as an agent if a beneficiary can compel the recipient entity to make distributions to it or on its behalf."), [trustee](https://asc.understandingaccounting.org/glossary/t/#trustee "An entity that has a duty to hold and manage assets for the benefit of a specified beneficiary in accordance with a charitable trust agreement. In some states, not-for-profit entities (NFPs) are organized under trust law rather than as corporations. Those NFPs are not trustees as defined because, under those statutes, they hold assets in trust for the community or some other broadly described group, rather than for a specific beneficiary."), or [intermediary](https://asc.understandingaccounting.org/glossary/i/#intermediary "Although in general usage the term intermediary encompasses a broad range of situations in which an entity acts between two or more other parties, in this usage, it refers to situations in which a recipient entity acts as a facilitator for the transfer of assets between a potential donor and a potential beneficiary (donee) but is neither an agent or trustee nor a donee and donor.") in a transfer between the donor and the beneficiary specified by the donor ([agency transaction](https://asc.understandingaccounting.org/glossary/a/#agency-transaction "A type of exchange transaction in which the reporting entity acts as an agent, trustee, or intermediary for another party that may be a donor or donee.")) (see paragraph [958-605-25-24](https://asc.understandingaccounting.org/asc/605/958/#605-958-25-24)). #### Fundraising Costs ##### [720-958-25-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:33b2a437df17f53452df7065acd97b6b25bc71207f56aa9967e89954852acdd0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of [fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time."), including the cost of special fundraising events, shall be expensed as incurred. Costs are incurred when the item or service has been received. Fundraising costs incurred in one period, such as those made to obtain bequests, compile a mailing list of prospective contributors, or solicit contributions in a direct-response activity, may result in contributions that will be received in future periods. Those costs also shall be expensed as incurred. #### Advertising Costs ##### [720-958-25-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:0b731d5c8ca48ff76149824ce6a8d72d8776cff7c1e5b619035fc24165950d57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An NFP shall comply with the guidance in Subtopic 720-35 applicable to its advertising [activities](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial."). Fundraising by NFPs is not considered advertising and is not within the scope of that Subtopic. ##### [720-958-25-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:63128fb2f7dd68d00cdbe10e7d32014b82b2b2e2178c36ba0205837bd00c8275 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). #### Reductions in Amounts Charged for Goods or Services ##### [720-958-25-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:174ba85bb1b14871d69796d7e2a2bf6c2be79d974a3ce740c486be6410f5f878 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Reductions in amounts charged for goods or services provided by an NFP shall be reported as expenses if such reductions are given in exchange for goods or services provided to the NFP, such as part of a [compensation](https://asc.understandingaccounting.org/glossary/c/#compensation "Reciprocal transfers of cash or other assets in exchange for services performed.") package. ##### [720-958-25-8](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:b1b6b4ffd3c32619d157b7cc1369f7d7a1c42e36dab910a3f5481be167bb1a38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ### Services Received from Personnel of an Affiliate ##### [720-958-25-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:10.551Z to 2026-09-10T01:13:10.551Z Record version: sha256:6fbc1e6ddaa36c2480f692ae7aef5e776331fb211ad89263ca9e331605a18513 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) shall recognize all services received from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") that directly benefit the recipient NFP (that is, are similar to personnel directly engaged by the recipient NFP). For example, that would include services performed by personnel of an affiliate for and under the direction of the recipient NFP and shared services. Shared services generally refers to services provided by a centralized function of one or more individuals within the affiliate group that the recipient NFP would otherwise typically need to purchase or have donated, if not provided by those personnel. Source downloaded (UTC): 2026-09-10T01:13:13.365Z to 2026-09-10T01:13:13.365Z Record version: sha256:53ae16cdf720d344c300664f21ba78013722c2045b288f3383533a1213910d61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/958/#30-initial-measurement) SEC content: no #### Contributions Made ##### [720-958-30-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:13.365Z to 2026-09-10T01:13:13.365Z Record version: sha256:2a098b5c19d44ab74eceb874c658d306b0fb0721ca36daa2126822eca3491cba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability and an expense recognized under paragraph [958-720-25-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-1) shall be measured initially at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."). ### Services Received from Personnel of an Affiliate ##### [720-958-30-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:13.365Z to 2026-09-10T01:13:13.365Z Record version: sha256:306780ce90efb35ac0df5cf82274da36ac1e5669f1401a7cfe8fc1fbe2cdc39b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Services received from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") that directly benefit the recipient [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) and for which the affiliate does not charge the recipient NFP shall be measured by the recipient NFP at the cost recognized by the affiliate in providing those services, except as provided in the following paragraph. Although the components of cost would depend on the nature and type of services provided and could vary from entity to entity, cost should include the direct personnel costs (for example, compensation and any payroll-related fringe benefits) incurred by the affiliate in providing the services to the recipient NFP. ##### [720-958-30-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:13.365Z to 2026-09-10T01:13:13.365Z Record version: sha256:9cd2858501a7b17c96a750b978656e5227ed1dc28e1f09b9127962109c35aa66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If recording a service received from personnel of an affiliate at the cost recognized by the affiliate for the personnel providing that service will significantly overstate or understate the value of the service received, the recipient NFP may elect to recognize that service at either of the following: 1. a The cost recognized by the affiliate for the personnel providing that service 2. b The fair value of that service. Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:ee89d5b7482540fa97ccb58b9e2261aeee64628b1f29bda306a112a2ba29c28f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/958/#45-other-presentation-matters) SEC content: no ##### [720-958-45-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:88f05c931a81c8543a300e302614e388c1c336dcefd722168354e2e6e6a72bdb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection provides guidance on the reporting of expenses incurred by [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs) as follows: 1. a Functional classification of expenses 2. b Analysis of expenses by their nature and function 3. c Classification of particular costs. For additional guidance on reporting under these classifications see Section 958-205-45. #### Functional Classification of Expenses ##### [720-958-45-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:c3a07993981e99f6bed8cdc7d539a64e0bf66b5efd37700ac18ed56acf2dc81f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To help donors, creditors, and others in assessing an NFP's service efforts, including the costs of its services and how it uses resources, a statement of activities or notes to financial statements shall provide information about expenses reported by their [functional expense classification](https://asc.understandingaccounting.org/glossary/f/#functional-expense-classification "A method of grouping expenses according to the purpose for which costs are incurred. The primary functional classifications of a not-for-profit entity are program services and supporting activities."), such as major classes of [program services](https://asc.understandingaccounting.org/glossary/p/#program-services "The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the not-for-profit entity (NFP) exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.") and [supporting activities](https://asc.understandingaccounting.org/glossary/s/#supporting-activities "Supporting activities are all activities of a not-for-profit entity (NFP) other than program services. Generally, they include the following: Management and general activities Fundraising activities Membership development activities."), for example: 1. a Program services 2. b Supporting activities, which often include one or more of the following: 1. 1 [Management and general activities](https://asc.understandingaccounting.org/glossary/m/#management-and-general-activities "Supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities.") 2. 2 [Fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time.") 3. 3 [Membership development activities](https://asc.understandingaccounting.org/glossary/m/#membership-development-activities "Membership development activities include soliciting for prospective members and membership dues, membership relations, and similar activities. However, if there are no significant benefits or duties connected with membership, the substance of membership development activities may, in fact, be fundraising."). ##### [720-958-45-2A](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-2A) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:3e8fd289299ba50060d506c1b02f7100468807924e15de51c775eb7f07e9392f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Activities that represent direct conduct or direct supervision of program or other supporting activities require allocation from management and general activities. Additionally, certain costs benefit more than one function and, therefore, shall be allocated. For example, information technology generally can be identified as benefiting various functions, such as management and general (for example, accounting and financial reporting and human resources), fundraising, and program delivery. Therefore, information technology costs generally would be allocated among the functions receiving direct benefit. ##### [720-958-45-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:04181ca172ebcecd3f8b4a99d743c279ca73e6d9b237cfedb660fb1bfb3e7a31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Program services are the activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the NFP exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs. For example, a large university may have programs for student instruction, research, and patient care, among others. Similarly, a health and welfare entity may have programs for health or family services, research, disaster relief, and public education, among others. A federated fundraising entity's programs may include making [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") to NFPs supported by the federated fundraising entity. Paragraphs [280-10-50-1 through 50-19](https://asc.understandingaccounting.org/asc/280/10/#280-10-50-1) , although not required of NFPs, may be helpful in determining what constitutes major classes of programs and supporting activities. ##### [720-958-45-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:27fdce3163cc86a74ebf2a0ae890e5e2bb7e48f94ddbeab41fdba94836c781b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Information about an NFP's major programs (or segments) can be enhanced by reporting the interrelationships of program expenses and program revenues. For example, a university might report expenses for its instruction and other academic services with related revenues from student tuition and expenses for its housing and food services with related revenues from room and board [fees](https://asc.understandingaccounting.org/glossary/f/#fees "See Compensation."). Related nonmonetary information about program inputs, outputs, and results also is helpful; for example, information about applications, acceptances, admissions, enrollment and occupancy rates, and degrees granted. Generally, reporting that kind of information is feasible only in supplementary information or management explanations or by other methods of financial reporting. ##### [720-958-45-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:085223b37243086b32d51c6b77bf7e9b29bbb0b9979468141344896561428ba5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The components of total program expenses shall be evident from the details provided on the face of the statement of activities, unless the notes to financial statements provide the information in paragraph [958-720-50-1(b)](https://asc.understandingaccounting.org/asc/720/958/#720-958-50-1). ##### [720-958-45-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:0b56fc50b0c81226685acfc3121746a6f3e89e970f8b5ab9b5322e16b040f5bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Supporting activities are all activities of an NFP other than program services. Generally, supporting activities include the following activities: 1. a [Management and general activities](https://asc.understandingaccounting.org/glossary/m/#management-and-general-activities "Supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities.") 2. b [Fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time.") 3. c [Membership development activities](https://asc.understandingaccounting.org/glossary/m/#membership-development-activities "Membership development activities include soliciting for prospective members and membership dues, membership relations, and similar activities. However, if there are no significant benefits or duties connected with membership, the substance of membership development activities may, in fact, be fundraising."). ##### [720-958-45-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:0454309a876c5c792f1a3c9ee6b2dc699a2b10ab0151abfeccfb2451e0919bdf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Management and general activities include the following: 1. a Oversight 2. b Business management 3. c General recordkeeping and payroll 4. d Budgeting 5. e Financing, including unallocated interest costs pursuant to paragraph [958-720-45-24](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-24) 6. f Soliciting funds other than [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") and membership dues, for example, the costs associated with: 1. 1 Promoting the sale of goods or services to customers, including advertising costs 2. 2 Responding to government, foundation, and other requests for proposals for customer-sponsored contracts for goods and services 7. ff Administering government, foundation, and similar customer-sponsored contracts, including billing and collecting fees and grant and contract financial reporting 8. g Disseminating information to inform the public of the NFP's stewardship of contributed funds 9. h Making announcements concerning appointments 10. i Producing and disseminating the annual report 11. j [Subparagraph superseded by Accounting Standards Update No. 2012-04](https://asc.understandingaccounting.org/updates/asu-2012-04/). 12. jj Employee benefits management and oversight (human resources) 13. k All other management and administration except for direct conduct of program services (see paragraphs [958-720-45-3 through 45-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-3) ), fundraising activities (see paragraphs [958-720-45-9 through 45-10](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-9) ), or membership development activities (see paragraphs [958-720-45-11 through 45-14](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-11) ). See paragraphs [958-720-55-171 through 55-176](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-171) for examples on which activities would constitute direct conduct or supervision of program or support functions and an example footnote disclosure on the cost allocation method used to allocate costs among functions. ##### [720-958-45-8](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:63bddf0e393ec35699bb383466b1fa3790dfa3ea7cd45f8256336d91ba21f6ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The costs of oversight and management usually include the salaries and expenses of the governing board, the chief executive officer of the NFP, and the supporting staff. If such staff spend a portion of their time directly conducting or supervising program services or categories of other supporting services, however, their salaries and expenses shall be allocated among those functions (see paragraph [958-720-45-2A](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-2A)). See paragraphs [958-720-55-171 through 55-176](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-171) for examples on which activities would constitute direct conduct or supervision of program or support functions and an example note disclosure on the method used to allocate costs among functions. ##### [720-958-45-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:dc1a59b6730403eee5ca9c2824079a23f9a656265805ef6800f540fe32e5a425 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Fundraising activities include the following: 1. a Publicizing and conducting fundraising campaigns 2. b Maintaining donor mailing lists 3. c Conducting special fundraising events 4. d Preparing and distributing fundraising manuals, instructions, and other materials 5. e Conducting other activities involved with soliciting contributions from individuals, foundations, government agencies, and others. ##### [720-958-45-10](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:942fdd4e3df3ac868d04ac7e2c57ec389611a0a17e9c30cf8ff5e8c869422957 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Fundraising activities include soliciting contributions of services from individuals, regardless of whether those services meet the recognition criteria for contributions in the [Contributions Received Subsection](https://asc.understandingaccounting.org/updates/page-2147480583/) of Section 958-605-25. ##### [720-958-45-11](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:c7cef90009bdce2e18979ee01e08916f94f346e87c6a90d8eab6aec3941fa436 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Membership development activities include the following: 1. a Soliciting for prospective members and membership dues 2. b Membership relations 3. c Similar activities. ##### [720-958-45-12](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:b1c16cef57065c5d3164577aa5d2ad6eb463061b78ebc0a3fdf690af5f9e5100 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If there are no significant benefits or duties connected with membership, however, the substance of membership development activities may, in fact, be fundraising, and the related costs shall be reported as fundraising costs. (See paragraphs [958-605-55-9 through 55-12](https://asc.understandingaccounting.org/asc/605/958/#605-958-55-9) for indicators useful in determining the contribution and exchange portions of membership dues.) ##### [720-958-45-13](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:23668e663aaaffa5609cdc5eba5ac04473e4136e578dcdc06c7231519a568fb3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Membership development activities may be conducted in conjunction with other activities. In circumstances in which membership development is in part soliciting membership dues and in part soliciting contributions, the activity is a [joint activity](https://asc.understandingaccounting.org/glossary/j/#joint-activity "An activity that is part of the fundraising function and has elements of one or more other functions, such as program, management and general, membership development, or any other functional category used by the entity."), as discussed in the Accounting for Costs of Activities that Include Fundraising Subsections of this Subtopic beginning with paragraph [958-720-45-28](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-28). ##### [720-958-45-14](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:aa8e349fb859f8630da3373f022ec3f26f9fe8438236586a397200f21398e44a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances in which membership development is conducted in conjunction with other activities but does not include soliciting contributions, the activity is not a joint activity, and the costs shall be allocated to membership development and one or more other functions. For example, if an activity involves costs to solicit new members (membership development) and direct costs of providing goods or services to existing members, in accordance with paragraph [958-720-45-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-3), an appropriate part of the costs of soliciting members shall be allocated to the membership development function and a part to program services. #### Analysis of Expenses by Their Nature and Function ##### [720-958-45-15](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:5b8ae3b66483da687bed1d0db2125c2e0830a8912d0cba4c4924bf8bad108098 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All NFPs shall report information about all expenses in one location on the face of the statement of activities, as a schedule in the notes to financial statements, or in a separate financial statement, as discussed in paragraph [958-205-45-6](https://asc.understandingaccounting.org/asc/205/958/#205-958-45-6). The relationship between functional classification and natural classification for all expenses shall be presented in an analysis that disaggregates [functional expense classifications](https://asc.understandingaccounting.org/glossary/f/#functional-expense-classification "A method of grouping expenses according to the purpose for which costs are incurred. The primary functional classifications of a not-for-profit entity are program services and supporting activities."), such as major classes of [program services](https://asc.understandingaccounting.org/glossary/p/#program-services "The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the not-for-profit entity (NFP) exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.") and [supporting activities](https://asc.understandingaccounting.org/glossary/s/#supporting-activities "Supporting activities are all activities of a not-for-profit entity (NFP) other than program services. Generally, they include the following: Management and general activities Fundraising activities Membership development activities."), by their [natural expense classifications](https://asc.understandingaccounting.org/glossary/n/#natural-expense-classification "A method of grouping expenses according to the kinds of economic benefits received in incurring those expenses. Examples of natural expense classifications include salaries and wages, employee benefits, professional services, supplies, interest expense, rent, utilities, and depreciation. (P) December 16, 2026; (N) December 16, 2026220-40-65-1A method of grouping expenses according to the types of economic benefits received in incurring those expenses. Examples of natural expense classifications include salaries and wages, employee benefits, nonemployee professional services, supplies, interest expense, rent, utilities, and depreciation."), such as salaries, rent, electricity, interest expense, supplies, depreciation, awards and grants to others, and professional fees. To the extent that expenses are reported by other than their natural classification (such as salaries included in cost of goods sold or facility rental costs of special events reported as direct benefits to donors), they shall be reported by their natural classification in the analysis of expenses by nature and function. For example, salaries, wages, and fringe benefits that are included as part of the cost of goods sold on the statement of activities shall be included with other salaries, wages, and fringe benefits in the analysis of expenses by nature and function. External and direct internal investment expenses that have been netted against investment return shall not be included in the analysis of expenses by nature and function. Certain items that are typically excluded from net income and that are included in other comprehensive income of business entities such as those items listed in paragraph [220-10-45-10A](https://asc.understandingaccounting.org/asc/220/10/#220-10-45-10A), are considered gains or losses and, like other gains and losses, shall not be included in the analysis of expenses by nature and function. See Note F in paragraph [958-205-55-21](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-21) for an example of how to report expenses by nature and function. ##### [720-958-45-16](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:bf2f8592e516ba6cfd98adc2ae4aabb779540989656beebb27641608560190ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/). #### Classification of Particular Costs ##### [720-958-45-17](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:762819eac2dd07b292f13d47f89b70ffbdd107937c6cc8efb14af043a2718cd8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection provides classification guidance for the following specific costs: 1. a Cost of premiums 2. b Cost of sales 3. c Reductions in amounts charged for goods and services 4. d Interest costs 5. e Cost of occupancy and maintenance 6. f Payments to affiliated NFPs 7. g Expenses of federated fundraising organizations. ##### [720-958-45-18](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:9edad955600fe8ae8fda43c2772209f9736a842fac7fcce4be74b86ab8e47724 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost of premiums (such as postcards or calendars) given to potential donors as part of mass fundraising appeals is a fundraising expense, and the classification of the donations received from the appeal as contributions is unaffected by the fact that premiums were given to potential donors. The premiums are not provided to potential donors in exchange for the assets contributed; they can be kept by all those from whom funds are solicited, regardless of whether a contribution is made. ##### [720-958-45-19](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e7db54f45504df3cf18af238896cf68cd6e51435673c27fb8521f10ac8a39654 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost of premiums (such as coffee mugs) that are given to resource providers to acknowledge receipt of a contribution shall also be reported as fundraising expenses if those costs are nominal in value compared with the value of the goods or services donated by the resource provider. For example, an NFP may provide a coffee mug to people making a contribution of $50 or more; the mug costs the NFP $1. The NFP shall recognize contributions for the total amount contributed and fundraising expense of $1 for each mug provided to donors. The cost of premiums that are greater than nominal in value shall be reported as cost of sales. If premiums are greater than nominal in value, transactions shall be reported as part exchange transaction and part contribution. ##### [720-958-45-20](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:b4cc37c8b6a22c6b17e0861136dd2acc143d7cf985ba9f20ee7fca8056922682 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The way that costs related to sales of goods and services are displayed depends on whether the sales constitute a major or central activity of the NFP or a peripheral or incidental activity. ##### [720-958-45-21](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-21) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:d88cba69cb23de8826f457d91b1b46bd38a40c1d64e3f557920913e7ea5d61d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, a not-for-profit museum that has a store that is a major or central activity shall report and display separately the revenues from the store's sales and the related cost of sales. Cost of sales is permitted to be reported immediately after revenues from sale of merchandise, and may be followed by a descriptive subtotal, or cost of sales may be reported with other expenses. If the store sells merchandise that is related to the museum's program, the store would be a program service and the cost of the store's sales would be reported as a program expense. In other circumstances, cost of sales could be reported as a separate supporting service. For example, if operating a cafeteria is a major or central activity but is not related to the NFP's programs, the cafeteria's cost of sales would be reported as supporting services. ##### [720-958-45-22](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-22) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e42c14b2727b232b7975d47b62a5d6429f9a87275e7c65c7857dcf9301ab17e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In contrast, a not-for-profit church that occasionally produces and sells a cookbook (considered to be a peripheral or incidental activity) has gains (or losses) from those sales, and the receipts and related costs are permitted to be offset and only the net gains (or losses) are reported. ##### [720-958-45-23](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-23) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:acf397bedac1f0d845d132fc4e78bd238169ddda2456b80c18c5e5176c2c0ee2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a reduction in the amount charged for goods and services is reported as an expense in accordance with paragraph [958-720-25-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-25-7), the expense shall be reported in the same functional classification in which the cost of the goods or services provided to the NFP are reported. ##### [720-958-45-24](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-24) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:b4ac625158fea6749e113dc502c7838e5914b9d616d36c79caa69ae334c5aec3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest costs, including interest on a building's mortgage, shall be allocated to specific programs or supporting services to the extent possible. Interest costs that cannot be allocated shall be reported as part of the management and general function. ##### [720-958-45-25](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-25) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:7b22b7f2521ff7cccc52ae50e530d6771ef47101a5afeb9214f5f1f31748de3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Occupying and maintaining a building is not a separate supporting service. ##### [720-958-45-26](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-26) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e8f397c87358356504b01b73857834ae34b18807d4575ba645808fcfc1ec2357 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Payments to related local and national NFPs shall be reported by their functional classification to the extent that it is practicable and reasonable to do so and the necessary information is available, even if it is impossible to allocate the entire amount of such payments to functions. Payments to those entities that cannot be allocated to functions shall be treated as a separate supporting service, reported on a statement of activities as a separate line item, and labeled unallocated payments to local (or national) organizations. ##### [720-958-45-27](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-27) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:a989fd0f099f9282504225cc2899d2854dd866ac8d089486e01d91bc6aec58b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Federated fundraising entities solicit and receive designated and undesignated contributions and make grants and awards to other NFPs. The fundraising activities of federated fundraising entities, including activities related to fundraising on behalf of others, shall be reported as fundraising expenses. ### Accounting for Costs of Activities that Include Fundraising ##### [720-958-45-28](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-28) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e9c9c7fb9e47af3ce75b5ab26dbc6e5c8619a5b11e8304b569d19f6a92f48d4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection provides guidance on the following: 1. a Classification of the costs of a joint activity 2. b Allocation methods 3. c Incidental activities. #### Classification of the Costs of a Joint Activity ##### [720-958-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:57c70e448cd9c49a7a04f2b460f46313601441c7b8d8a7f5983f5028b2040f2f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the criteria of purpose, audience, and content are met, the costs of a [joint activity](https://asc.understandingaccounting.org/glossary/j/#joint-activity "An activity that is part of the fundraising function and has elements of one or more other functions, such as program, management and general, membership development, or any other functional category used by the entity.") shall be classified as follows: 1. a The costs that are identifiable with a particular function shall be charged to that function. 2. b [Joint costs](https://asc.understandingaccounting.org/glossary/j/#joint-costs "The costs of conducting joint activities that are not identifiable with a particular component of the activity. For example, the cost of postage for a letter that includes both fundraising and program components is a joint cost. Joint costs may include the following costs: Salaries Contract labor Consultants Professional fees Paper Printing Postage Event advertising Telephones Airtime Facility rentals.") shall be allocated between fundraising and the appropriate program or management and general function. If any of the criteria are not met, all costs of the joint activity shall be reported as fundraising costs, including costs that otherwise might be considered program or management and general costs if they had been incurred in a different [activity](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial."), subject to the exception in the following sentence. Costs of goods or services provided in exchange transactions that are part of joint activities, such as costs of direct donor benefits of a special event (for example, a meal), shall not be reported as fundraising. ##### [720-958-45-30](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-30) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:6841ce1f6dd601861fdc8f0979c6cb2493b34dfb9b21b4ff9df7f8e198ea214c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances in which a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) that conducts joint activities has a functional structure that includes functional classifications other than fundraising, program, and management and general (see paragraph [958-720-05-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-6)), all costs of those joint activities shall be charged to fundraising (or the category in which fundraising is reported), unless the purpose, audience, and content of those joint activities are appropriate for achieving those other functions. ##### [720-958-45-31](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-31) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:46f99cd1e7976da114d9b485649102d7b74ef1d2774facdcf416cbc0bcd9c0da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Classification of costs incurred by an NFP for joint activities is based on the following criteria: 1. a The purpose criterion 2. b The audience criterion 3. c The content criterion. ##### [720-958-45-32](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-32) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e4eb0291f9c542c67e3d2b73038339992a3ccc908102635f22fa67c3dcc0513a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 1 through 16 (see paragraphs [958-720-55-36 through 55-159](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-36) ) provide illustrations of the tests and analysis that are used to determine whether the criteria listed in the preceding paragraph are met. ##### [720-958-45-33](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:19799ead7be508aed97d2467b47a2a1ad67a1e94aac081043412e84982fdec7a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met if the purpose of the joint activity includes accomplishing program or management and general functions. ##### [720-958-45-34](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-34) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:a2ff396f27b6a263f118c8b1eb6631cfcefa5e9071bb0737f56b83bd8e100d80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [958-720-45-35 through 45-39](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35) provide guidance that shall be considered in determining whether the purpose criterion is met, specifically: 1. a If program functions are combined with [fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time."), paragraphs [958-720-45-35 through 45-39](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35) provide guidance pertaining to program functions only. 2. b If program functions, management and general functions, or both are combined with fundraising activities, paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) provides guidance pertaining to both program and management and general functions. ##### [720-958-45-35](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:0d6fcd2de54712449f44988ea1c9d3594405d34a0ce6ac31f2002ebbf01a1321 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To accomplish program functions, the activity shall call for specific action by the audience that will help accomplish the NFP's mission. Actions that help accomplish the NFP's mission are actions that do either of the following: 1. a Benefit the recipient (such as by improving the recipient's physical, mental, emotional, or spiritual health and well-being) 2. b Benefit society (by addressing societal problems). ##### [720-958-45-36](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-36) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:52f2ca4ef1aa48122ee393ec0931e1b486f067d43c94b2a67dfffc2f6161db2f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [958-720-55-4 through 55-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-4) , which provide implementation guidance for determining whether an activity includes a call for a specific action. If the activity calls for specific action by the audience that will help accomplish the NFP's mission, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) shall also be considered in determining whether the purpose criterion is met. ##### [720-958-45-37](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-37) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:9585e58066f1c87a3f3d90dcf7bf18f675ad256609beba0edc9cdd80488722f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances in which joint activities are conducted, a presumption exists that expenses shall be reported as fundraising rather than as program or management and general. The following circumstances are insufficient to overcome that presumption: 1. a The purpose of the activity includes educating the public about [causes](https://asc.understandingaccounting.org/glossary/c/#causes "The causes, conditions, needs, or concerns that a not-for-profit entity's (NFP's) programs are designed to address."). 2. b The audience has a need or reasonable potential for use of any educational component of the activity pertaining to causes. 3. c The audience has the ability to assist the NFP in meeting the goals of the program component of the activity by becoming educated about causes. To conclude that the criteria of purpose, audience, and content are met, program activities shall call for specific action by the recipient (other than becoming educated about causes) that will help accomplish the NFP's mission. ##### [720-958-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:b96531997329c3e995f435215aaff97c3add2d3ce8be20ed886b38e37bb5efb6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following factors shall be considered, in the order in which they are listed, to determine whether the purpose criterion is met: 1. a The compensation or fees test 2. b The separate and similar activities test 3. c The other evidence test. ##### [720-958-45-39](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-39) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:77949bb24a6c227c59336d87bc0b145920e3b6fa622bbbc2cba686a0e9b28262 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Examples 1 through 16 (paragraphs [958-720-55-36 through 55-159](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-36) ), which provide implementation guidance for these three tests. ##### [720-958-45-40](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:4e0aaf3916b1d199c24d0e92b6f299a9c6b24e3c3ea4485adf74b39be8345060 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is not met if a majority of compensation or fees for any party's performance of any component of the discrete joint activity varies based on [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") raised for that discrete joint activity. ##### [720-958-45-41](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-41) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e3e71f5108d7e6ed2d463ab92c8e16551fc791d076daa1a2a00b4088b86fbdd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some compensation contracts provide that compensation for performing the activity is based on a factor other than contributions raised, but not to exceed a specified portion of contributions raised. For example, a contract may provide that compensation for performing the activity is $10 per contact hour, but not to exceed 60 percent of contributions raised. In such circumstances, compensation is not considered based on amounts raised, unless the stated maximum percentage is met. In circumstances in which it is not yet known whether the stated maximum percentage is met, compensation is not considered based on amounts raised, unless it is probable that the stated maximum percentage will be met. ##### [720-958-45-42](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-42) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:174c2f47bc4f92ae6fb7bad2453a16c511211e7689c0a3856417e5ede35108e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The compensation or fees test is a negative test in that it either: 1. a Results in failing the purpose criterion 2. b Is not determinative of whether the purpose criterion is met. ##### [720-958-45-43](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-43) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:80b065558988a2593c73f0bdc1e7cbe28bd8067749411d44f858d9c46f144ef7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In considering the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38), compensation or fees test is the preeminent guidance. Therefore, if the activity fails the compensation or fees test, the activity fails the purpose criterion and the separate and similar activities test shall not be considered. ##### [720-958-45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-44) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:23eabe431df3c2227fee53d5a7c6347c82590e4b14ab7a3f80eac8de7c068e84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the purpose criterion is not failed based on the compensation or fees test, this factor is not determinative of whether the purpose criterion is met, and the factor in the following paragraph and paragraph [958-720-45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-46) (the separate and similar activities test) shall be considered. ##### [720-958-45-45](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:aa6130e32b87c1a62a1ff6e9ccba13deee12353e19959c904a165e820e28c2cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met if a similar program or management and general activity is conducted separately and on a similar or greater scale. That is, the purpose criterion is met if either of the following conditions is met: 1. a The first condition is met if both of the following are true: 1. 1 The program component of the joint activity calls for specific action by the recipient that will help accomplish the NFP's mission (see paragraphs [958-720-45-35 through 45-37](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35) ). 2. 2 A similar program component is conducted without the fundraising component using the same [medium](https://asc.understandingaccounting.org/glossary/m/#medium "A means of mass communication, such as direct mail, direct response advertising, or television.") and on a scale that is similar to or greater than the scale on which it is conducted with the fundraising. Determining the scale on which an activity is conducted may be subjective. Factors to consider in determining the scale on which an activity is conducted may include dollars spent, the size of the audience reached, and the degree to which the characteristics of the audience are similar to the characteristics of the audience of the activity being evaluated. 2. b The second condition is met if a management and general activity that is similar to the management and general component of the joint activity being accounted for is conducted without the fundraising component using the same medium and on a scale that is similar to or greater than the scale on which it is conducted with the fundraising. ##### [720-958-45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-46) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:39c1ab08f15b2358abed37f784faabbd8a04f460fdb45d871fc2fc8a10221c06 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the purpose criterion is met based on the separate and similar activities test, the other evidence test shall not be considered. If the separate and similar activities test is not determinative, the other evidence test shall be considered. ##### [720-958-45-47](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-47) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:4a6046f6954d7c9429bdd9f8ba21c25a806e91e041f60a549dd6ff299abab725 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The compensation or fees test and the separate and similar activities test may not always be determinative because the attributes that they consider may not be present. If the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) or [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) do not determine whether the purpose criterion is met, other evidence may determine whether the criterion is met. All available evidence, both positive and negative, shall be considered to determine whether, based on the weight of that evidence, the purpose criterion is met. See paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , which provide implementation guidance for applying the other evidence test. ##### [720-958-45-48](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-48) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:08f2fb48e7dcef804d05aeca88b47bd87032f72fc82f0d53b33da8f2d759b508 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A rebuttable presumption exists that the audience criterion is not met if the audience includes prior donors or is otherwise selected based on its ability or likelihood to contribute to the NFP. That presumption can be overcome if the audience is also selected for any of the reasons in the following paragraph. In determining whether that presumption is overcome, an NFP shall consider the extent to which the audience is selected based on its ability or likelihood to contribute to the NFP and contrast that with the extent to which it is selected for one or more of the reasons in the following paragraph. For example, if the audience's ability or likelihood to contribute is a significant factor in its selection and it has a need for the action related to the program component of the joint activity, but having that need is an insignificant factor in its selection, the presumption would not be overcome. ##### [720-958-45-49](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-49) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:a72a0411621678d79600a5740151c010595babdb9dc2d4ba0704d3473f693dd1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances in which the audience includes no prior donors and is not otherwise selected based on its ability or likelihood to contribute to the NFP, the audience criterion is met if the audience is selected for any of the following reasons: 1. a The audience's need to use or reasonable potential for use of the specific action called for by the program component of the joint activity 2. b The audience's ability to take specific action to assist the NFP in meeting the goals of the program component of the joint activity 3. c The NFP is required to direct the management and general component of the joint activity to the particular audience or the audience has reasonable potential for use of the management and general component. ##### [720-958-45-50](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-50) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:672d4f9519aa73c5b0fcc282d1e73514078923aaac5bad18377bc6d572ff1e91 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met if the joint activity supports program or management and general functions, as follows: 1. a Program. The joint activity calls for specific action by the recipient that will help accomplish the NFP's mission (see paragraph [958-720-45-35](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35)). If the need for and benefits of the action are not clearly evident, information describing the action and explaining the need for and benefits of the action is provided. 2. b Management and general. The joint activity fulfills one or more of the NFP's management and general responsibilities through a component of the joint activity. ##### [720-958-45-51](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-51) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:e7485d97e835e3a6571ce30d520e9a78bd549e52c5d248af591655188c581c00 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Information identifying and describing the NFP, its causes, or how the contributions provided will be used is considered in support of fundraising. ##### [720-958-45-52](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-52) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:157e0420f5cc7217cc9a1742d33cfea8ebb9c6d7fb5e1517249249fd1bab972c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Activities that are undertaken as a result of receiving contributions are [management and general activities](https://asc.understandingaccounting.org/glossary/m/#management-and-general-activities "Supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities."). For example, activities conducted to comply with requirements of regulatory bodies concerning contributions that have been received are management and general activities. ##### [720-958-45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-53) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:3b04dbb3889627e8e384e691bc8011db014eb79551c3ed3e575e7d744dfc98ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Activities that are undertaken in order to solicit contributions are fundraising activities. For example, activities conducted to comply with requirements of regulatory bodies concerning soliciting contributions, such as the requirement by some states or other regulatory bodies that certain disclosures be included when soliciting contributions, are fundraising activities. For purposes of applying this guidance, communications that include such required disclosures are considered fundraising activities and are not considered management and general activities. #### Allocation Methods ##### [720-958-45-54](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-54) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:4a485af0bece5cfdcc326f33dcf3d968031453e79875bacfd07078c4687211f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost allocation methodology used shall be rational and systematic, it shall result in an allocation of joint costs that is reasonable, and it shall be applied consistently given similar facts and circumstances. See paragraphs [958-720-55-25 through 55-31](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-25) , which provide explanations and illustrations of some acceptable allocation methods. The allocation of joint costs shall be based on the degree to which costs were incurred for the functions to which the costs are allocated (that is, program, management and general, or fundraising). For purposes of determining whether the allocation methodology for a particular joint activity is consistent with methodologies used for other particular joint activities, facts and circumstances that may be considered include factors related to the content and relative costs of the components of the activity. The audience shall not be considered in determining whether the facts and circumstances are similar for purposes of determining whether the allocation methodology for a particular joint activity is consistent with methodologies used for other particular joint activities. A change in cost allocation methodology shall be evaluated in accordance with Topic 250 to determine if it is a change in accounting principle. #### Incidental Activities ##### [720-958-45-55](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-55) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:6f8a9767ab5ee99de3634c575774eb1783ac28f5d1bd50c5935386ed73a087a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some fundraising activities conducted in conjunction with program or management and general activities are incidental to such program or management and general activities. In circumstances in which a fundraising, program, or management and general activity is conducted in conjunction with another activity and is incidental to that other activity, and the criteria in paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29) for allocation are met, joint costs are permitted but not required to be allocated and may therefore be charged to the functional classification related to the activity that is not the incidental activity. However, in circumstances in which the program or management and general activities are incidental to the fundraising activities, it is unlikely that the criteria in that paragraph to permit allocation of joint costs would be met. See paragraphs [958-720-55-161](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-161), [958-720-55-163](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-163), and [958-720-55-165](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-165) for implementation guidance for incidental activities. ### Services Received from Personnel of an Affiliate ##### [720-958-45-56](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-56) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:16.668Z to 2026-09-10T01:13:16.668Z Record version: sha256:f67eab80499f796d84c8976484e9c7c93877c572dd951f663b146a7a5a0d8c03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The increase in net assets associated with services received from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") that directly benefit the recipient [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) and for which the affiliate does not charge the recipient NFP shall not be presented as a contra-expense or a contra-asset. The corresponding decrease in net assets or the creation or enhancement of an asset resulting from the use of services received from personnel of an affiliate that directly benefit the recipient NFP and for which the affiliate does not charge the recipient NFP shall be presented similar to how other such expenses or assets are presented. See paragraph [958-220-45-21](https://asc.understandingaccounting.org/asc/220/958/#220-958-45-21) for presentation guidance on services received from personnel of an affiliate. Source downloaded (UTC): 2026-09-10T01:13:20.026Z to 2026-09-10T01:13:20.026Z Record version: sha256:5a6d8ddb8247d2b3239b94e2ec3016217fc7835b29769f7496253fae384444fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/958/#50-disclosure) SEC content: no ##### [720-958-50-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:20.026Z to 2026-09-10T01:13:20.026Z Record version: sha256:413062df704c95a233d9f4234d20df1945d78f6648556851290b5f92c0bb7435 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The financial statements of a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) shall disclose the following information: 1. a Total fundraising expenses. 2. b Total program expenses and information about why total program expenses disclosed in the notes do not articulate with the statement of activities. Pursuant to paragraph [958-720-45-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-5), this disclosure is only required if the components of total program expenses are not evident from the details provided on the face of the statement of activities (for example, if cost of sales is not identified as either program or supporting services). 3. bb The relationship between functional classification and natural classification for all expenses in an analysis that disaggregates functional expense classifications by their natural expense classifications in accordance with paragraph [958-720-45-15](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-15). 4. c The amount of income tax expense and the nature of the activities that generated the taxes, which is only required if the NFP incurs income tax expense. 5. d A description of the methods used to allocate costs among program and support functions. See paragraph [958-720-55-176](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-176) or Note F in paragraph [958-205-55-21](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-21) for examples of note disclosures on the cost allocation methods used. ### Accounting for Costs of Activities that Include Fundraising ##### [720-958-50-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:20.026Z to 2026-09-10T01:13:20.026Z Record version: sha256:ce55e2d0a8f5df1377473bf67f83fd63dbddb2213856466206f860085647ec97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) that allocates [joint costs](https://asc.understandingaccounting.org/glossary/j/#joint-costs "The costs of conducting joint activities that are not identifiable with a particular component of the activity. For example, the cost of postage for a letter that includes both fundraising and program components is a joint cost. Joint costs may include the following costs: Salaries Contract labor Consultants Professional fees Paper Printing Postage Event advertising Telephones Airtime Facility rentals.") shall disclose all of the following in the notes to its financial statements: 1. a The types of [activities](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial.") for which joint costs have been incurred 2. b A statement that such costs have been allocated 3. c The total amount allocated during the period and the portion allocated to each functional expense category. An NFP is also encouraged, but not required, to disclose the amount of joint costs for each kind of [joint activity](https://asc.understandingaccounting.org/glossary/j/#joint-activity "An activity that is part of the fundraising function and has elements of one or more other functions, such as program, management and general, membership development, or any other functional category used by the entity."), if practical. See Example 20 (paragraph [958-720-55-166](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-166)) for illustrative disclosures. ### Services Received from Personnel of an Affiliate ##### [720-958-50-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:20.026Z to 2026-09-10T01:13:20.026Z Record version: sha256:0c9a06bd2daddf9cc5fffffacd9999b99ce295013bc8c1741bc682ebf50a1967 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosures in Subtopic 850-10 shall be provided for services received by a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control."). Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cbaf34fc9399d64f461d46ca724dd5b4227d0f71baf15cb0305c36e677fe037d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/958/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [720-958-55-1A](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-1A) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:192903867e24a9c85b12d475c7e8ced89b37699a1073b8f5a2d9b7a9ec8af083 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following diagram illustrates the process for determining whether a transfer of assets to a recipient is a [contribution](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") or an exchange transaction and how to determine whether a contribution is conditional. Further guidance on what is an exchange transaction or a contribution as well as guidance on what is a [conditional contribution](https://asc.understandingaccounting.org/glossary/c/#conditional-contribution "A contribution that contains a donor-imposed condition.") can be found in Subtopic 958-605 on not-for-profit entities—revenue recognition. - ![](https://asc.understandingaccounting.org/asc-img/GUID-3831DC44-E925-4BD3-BF7E-BB0243B8A31F-low.gif) Is the transaction one in which each party directly receives commensurate value? It is an exchange transaction. Apply Topic 720 on other expenses or other applicable Topics. It is a nonreciprocal transaction. Not-for-profit entities should apply this Subtopic. All other entities should apply Subtopic 720-25 on contribution expenses. Is there a donor-imposed condition or conditions present (a barrier and a right of return/right of release must exist)? It is conditional. Recognize expense when the condition or conditions are met. Meeting of Condition. It is unconditional. Recognize expense. See paragraph 958-605-55-6 for guidance about transactions that are in part an exchange and in part a contribution. ### Accounting for Costs of Activities That Include Fundraising ##### [720-958-55-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bc7e2685fa4032979de1bb6045709af614ae275a99d8431582bd845732dbc294 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-08](https://asc.understandingaccounting.org/updates/asu-2018-08/). #### Implementation Guidance ##### [720-958-55-1B](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-1B) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:60c380467c22b8d3336255aa9fdb91953686831ec95bbf56dd54b10f2f6631c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection, which is an integral part of the requirements of the Accounting for Costs of Activities That Include Fundraising Subsections of this Subtopic, provides general guidance to be used in the classification and allocation of costs incurred in [activities](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial.") that include fundraising. ##### [720-958-55-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f062ca2110d58610829ce331684eb188fb37bf275e138872670219d5e8ce6620 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following flowchart summarizes the guidance in paragraphs [958-720-45-29 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29) and is not intended as a substitute for the guidance therein. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-F156DE18-EB50-4B2B-B9DA-139083AB72D0-low.gif) ##### [720-958-55-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:591a0c388e760009adf5e14f286dec101768d6b734f054c638643725d3864f2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following provides implementation guidance related to paragraph [958-720-45-35](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35). ##### [720-958-55-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:76952f51a92a5c66da8308b8e7a443409267d3d16081c262d619ec29d18fec3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of activities that call for specific action by the audience that will help accomplish the [not-for-profit entity's](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP's) mission: 1. a An NFP's mission includes improving individuals' physical health. For that NFP, motivating the audience to take specific action that will improve their physical health is a call for specific action by the audience that will help accomplish the NFP's mission. An example of an activity that motivates the audience to take specific action that will improve their physical health is sending the audience a brochure that urges them to stop smoking and suggests specific methods, instructions, references, and resources that may be used to stop smoking. 2. b An NFP's mission includes educating individuals in areas other than the [causes](https://asc.understandingaccounting.org/glossary/c/#causes "The causes, conditions, needs, or concerns that a not-for-profit entity's (NFP's) programs are designed to address."), conditions, needs, or concerns that the NFP's programs are designed to address (referred to as causes). For that NFP, educating the audience in areas other than causes or motivating the audience to otherwise engage in specific activities that will educate them in areas other than causes is a call for specific action by the audience that will help accomplish the NFP's mission. Examples of NFPs whose mission includes educating individuals in areas other than causes are universities and possibly other NFPs. An example of an activity motivating individuals to engage in education in areas other than causes is a university inviting individuals to attend a lecture or class in which the individuals will learn about the solar system. 3. c Some educational activities that might otherwise be considered as educating the audience about causes may implicitly call for specific action by the audience that will help accomplish the NFP's mission. For example, activities that educate the audience about environmental problems caused by not recycling implicitly call for that audience to increase recycling. If the need for and benefits of the specific action are clearly evident from the educational message, the message is considered to include an implicit call for specific action by the audience that will help accomplish the NFP's mission. ##### [720-958-55-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:7df17ab75102508dd62c94471f946c59530d765f1b67146dd08f87c4663f15c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of activities that fail to call for a specific action by the audience that will help accomplish the NFP's mission: 1. a Educating the audience about causes or motivating the audience to otherwise engage in specific activities that will educate them about causes is not a call for specific action by the audience that will help accomplish the NFP's mission. Such activities are considered in support of fundraising. 2. b Asking the audience to make [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") is not a call for specific action by the audience that will help accomplish the NFP's mission. ##### [720-958-55-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d051d9a803a1c147ac93f7ea26f50666b8d3e0455a717f170bf9b5cd7ad827c7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following provides implementation guidance related to paragraph [958-720-45-47](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-47). ##### [720-958-55-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9700849bfa6d5c5ea41c84f0d7dbad4b5de7ea02b6aafbbc41b51e472068c883 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of indicators that provide evidence that the purpose criterion may be met: 1. a Measuring program results and accomplishments of the activity. The facts may indicate that the purpose criterion is met if the NFP measures program results and accomplishments of the activity (other than measuring the extent to which the public was educated about causes). 2. b [Medium](https://asc.understandingaccounting.org/glossary/m/#medium "A means of mass communication, such as direct mail, direct response advertising, or television."). The facts may indicate that the purpose criterion is met if the program component of the [joint activity](https://asc.understandingaccounting.org/glossary/j/#joint-activity "An activity that is part of the fundraising function and has elements of one or more other functions, such as program, management and general, membership development, or any other functional category used by the entity.") calls for specific action by the recipient that will help accomplish the NFP's mission and if the NFP conducts the program component without a significant fundraising component in a different medium. Also, the facts may indicate that the purpose criterion is met if the NFP conducts the management and general component of the joint activity without a significant fundraising component in a different medium. ##### [720-958-55-8](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:eaf3f15163027bb2e2847115b8616232822f76e8277eaeb808dc934f16cd9be7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of indicators that provide evidence that the purpose criterion may not be met: 1. a Evaluation. The facts may indicate that the purpose criterion is not met if the evaluation of any party's performance of any component of the discrete joint activity varies based on contributions raised for that discrete joint activity. 2. b [Compensation](https://asc.understandingaccounting.org/glossary/c/#compensation "Reciprocal transfers of cash or other assets in exchange for services performed."). The facts may indicate that the purpose criterion is not met if some, but less than a majority, of compensation or [fees](https://asc.understandingaccounting.org/glossary/f/#fees "See Compensation.") for any party's performance of any component of the discrete joint activity varies based on contributions raised for that discrete joint activity. ##### [720-958-55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b2c291503c48fb7f04384a8284cfc00f34e3e16d9c828ed80d5e3e9e49b4b426 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of indicators that provide evidence that the purpose criterion may be either met or not met: 1. a Evaluation of measured results of the activity. The NFP may have a process to evaluate measured program results and accomplishments of the activity (other than measuring the extent to which the public was educated about causes). If the NFP has such a process, in evaluating the effectiveness of the joint activity, the NFP may place significantly greater weight on the activity's effectiveness in accomplishing program goals or may place significantly greater weight on the activity's effectiveness in raising contributions. The former may indicate that the purpose criterion is met. The latter may indicate that the purpose criterion is not met. 2. b Qualifications. The following qualifications and duties of those performing the joint activity should be considered: 1. 1 If a third party, such as a consultant or contractor, performs part or all of the joint activity, such as producing brochures or making telephone calls, the third party's experience and the range of services provided to the NFP should be considered in determining whether the third party is performing fundraising, program (other than educating the public about causes), or [management and general activities](https://asc.understandingaccounting.org/glossary/m/#management-and-general-activities "Supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities.") on behalf of the NFP. 2. 2 If the NFP's employees perform part or all of the joint activity, the full range of their job duties should be considered in determining whether those employees are performing fundraising, program (other than educating the public about causes), or management and general activities on behalf of the NFP. For example, employees who are not members of the fundraising department and employees who are members of the fundraising department but who perform non-[fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time.") are more likely to perform activities that include program or management and general functions than are employees who otherwise devote significant time to fundraising. 3. c Tangible evidence of intent. Tangible evidence indicating the intended purpose of the joint activity should be considered. Examples of such tangible evidence include the following: 1. 1 The NFP's written mission statement, as stated in its fundraising activities, bylaws, or annual report 2. 2 Minutes of board of directors, committee, or other meetings 3. 3 Restrictions imposed by donors (who are not related parties) on gifts intended to fund the joint activity 4. 4 Long-range plans or operating policies 5. 5 Written instructions to other entities, such as script writers, consultants, or list brokers, concerning the purpose of the joint activity, audience to be targeted, or method of conducting the joint activity 6. 6 Internal management memoranda. ##### [720-958-55-10](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bc3a361f5beb545e0f3d510d0c506d9636adde9382dffd98af8916a7d3ed0e78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following provides implementation guidance related to paragraphs [958-720-45-48 through 45-49](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-48) . ##### [720-958-55-11](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:6e41e925a1c78981d25e86db7c47d27cb96b70cfbd0f901059e1de5d413efbb3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some NFPs conduct joint activities that are special events, such as symposia, dinners, dances, and theater parties, in which the attendee receives a direct benefit (for example, a meal or theater ticket) and for which the admission price includes a contribution. For example, it may cost $500 to attend a dinner with a [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of $50. In that case, the audience is required to make a $450 contribution in order to attend. ##### [720-958-55-12](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cf81a083d6551e489bf77bf329c1651dfcd45a80f579daedf48d0d8bb8d45cbd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances in which the audience is required to make a contribution to participate in a joint activity, such as attending a special event, the audience's ability or likelihood to contribute is a significant factor in its selection. Therefore, in circumstances in which the audience is required to make a contribution to participate in a joint activity, the extent to which the audience is selected for the program or management and general reasons in paragraph [958-720-45-49](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-49) must be overwhelmingly significant in order to rebut the presumption that the audience criterion is not met. ##### [720-958-55-13](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3396f61a6fb0fe56c76aaa80a06a32ade271b4a7b21cac4b08635e3a739c0f35 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The source of the names and the characteristics of the audience should be considered in determining the reason for selecting the audience. Some NFPs use lists compiled by others to reach new audiences. The source of such lists may indicate the purpose or purposes for which they were selected. For example, lists acquired from entities with similar or related programs are more likely to meet the audience criterion than are lists acquired from entities with dissimilar or unrelated programs. Also, the characteristics of those on the lists may indicate the purpose or purposes for which they were selected. For example, a list based on a consumer profile of those who buy environmentally friendly products may be useful to an NFP whose mission addresses environmental concerns and could therefore indicate that the audience was selected for its ability to take action to assist the NFP in meeting program goals. However, a list based on net worth would indicate that the audience was selected based on its ability or likelihood to contribute, unless there was a correlation between net worth and the program or management and general components of the activity. ##### [720-958-55-14](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:09f3dfa72ee0cceae28d96611d8bba064b696f6c3ec9599c4cc05e2a26f713e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some audiences may be selected because they have an interest in or affinity to the program. For example, homeowners may have an interest in the homeless because they are sympathetic to the plight of the homeless. Nevertheless, including homeowners in the audience of a program activity to provide services to the homeless would not meet the audience criterion, because they do not have a need or reasonable potential for use of services to the homeless. ##### [720-958-55-15](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b4b6ad686edf04238c2ed527603be8db5d35f2633422370883f51ccec4067cf2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [958-720-45-49(c)](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-49) provides that the audience criterion is met if the NFP is required to direct the management and general component of the joint activity to the particular audience or the audience has reasonable potential for use of the management and general component. An example of a joint activity in which the audience is selected because the NFP is required to direct the management and general component of the joint activity to the particular audience is an activity in which the NFP sends a written acknowledgment or other information to comply with requirements of the Internal Revenue Service (IRS) to prior donors and includes a request for contributions. An example of a joint activity in which the audience is selected because the audience has reasonable potential for use of the management and general component is an activity in which the NFP sends its annual report to prior donors and includes a request for contributions. ##### [720-958-55-16](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:897bbc27b3d1c7703a1a25d3b44f11300a5802a26cf3037d5444cd7f6d5055a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following provides implementation guidance related to paragraphs [958-720-45-50 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-50) . ##### [720-958-55-17](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:96103b234ec2adaa35cb3652ca43c55a850ec8632a68e82e1e29313f3aed92eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [958-720-45-50(a)](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-50) provides that, to meet the content criterion, program activities should call for specific action by the recipient that will help accomplish the NFP's mission. As discussed in paragraph [958-720-45-35](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-35), the action should benefit the recipient or society. Examples of actions that benefit the recipient (such as by improving the recipient's physical, mental, emotional, or spiritual health and well-being) or society (such as by addressing societal problems) include the following: 1. a Actions that benefit the recipient include the following: 1. 1 Stop smoking. Specific methods, instructions, references, and resources should be suggested. 2. 2 Do not use alcohol or drugs. Specific methods, instructions, references, and resources should be suggested. 2. b Actions that benefit society include the following: 1. 1 Write or call. The party to communicate with and the subject matter to be communicated should be specified. 2. 2 Complete and return the enclosed questionnaire. The results of the questionnaire should help the NFP achieve its mission. For example, if the NFP discards the questionnaire, it does not help the NFP achieve its mission. 3. 3 Boycott. The particular product or entity to be boycotted should be specified. ##### [720-958-55-18](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:4a1d899b29cf65d602e931e3b84619749a23ddcd7a26282e4dcb4eb3c64e22d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [958-720-45-50(b)](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-50) provides that to meet the content criterion, management and general functions are required to fulfill one or more of the NFP's management and general responsibilities through a component of the joint activity. Some states or other regulatory bodies require that certain disclosures be included when soliciting contributions. Paragraph [958-720-45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-53) provides that for purposes of applying this guidance, communications that include such required disclosures are considered fundraising activities and are not considered management and general activities. Some examples of such disclosures include the following: - Information filed with the attorney general concerning this charitable solicitation may be obtained from the attorney general of \[the state\] by calling 123-4567. Registration with the attorney general does not imply endorsement. - A copy of the registration and financial information may be obtained from the Division of Consumer Services by calling toll-free, within \[the state\], 1-800-123-4567. Registration does not imply endorsement, approval, or recommendation by \[the state\]. - Information about the cost of postage and copying, and other information required to be filed under \[the state\] law, can be obtained by calling 123-4567. - The entity's latest annual report can be obtained by calling 123-4567. ##### [720-958-55-19](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:ebcc9b0f5816b5de6b185a930457274e887761ca7165385b85cd875bd976a04c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFPs that do not use the functional classifications of fundraising, program, and management and general shall apply the guidance in the Accounting for Costs of Activities that Include Fundraising Subsections of this Subtopic, for purposes of accounting for joint activities, using their reporting model. ##### [720-958-55-20](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:c5b2fcb895660d0180e24c5b431937b4771461f073db20f828c12c2a8a694e83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some NFPs may conduct [membership development activities](https://asc.understandingaccounting.org/glossary/m/#membership-development-activities "Membership development activities include soliciting for prospective members and membership dues, membership relations, and similar activities. However, if there are no significant benefits or duties connected with membership, the substance of membership development activities may, in fact, be fundraising."). If there are no significant benefits or duties connected with membership, the substance of the membership development activities may, in fact, be fundraising. In such circumstances, the costs of those activities shall be charged to fundraising. To the extent that member benefits are received, membership is an exchange transaction. ##### [720-958-55-21](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d8fa60c458d8937a0ee39e12f1d90c4fd911113b69e1466c22142dd3dd39ee92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances in which membership development is in part soliciting revenues from exchange transactions and in part soliciting contributions and the purpose, audience, and content of the activity are appropriate for achieving membership development, [joint costs](https://asc.understandingaccounting.org/glossary/j/#joint-costs "The costs of conducting joint activities that are not identifiable with a particular component of the activity. For example, the cost of postage for a letter that includes both fundraising and program components is a joint cost. Joint costs may include the following costs: Salaries Contract labor Consultants Professional fees Paper Printing Postage Event advertising Telephones Airtime Facility rentals.") should be allocated between fundraising and the exchange transaction. ##### [720-958-55-22](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d7844e2bfc71baa12e0a0684fa06f41f588b97186d51bf21166025b768322c25 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Most transactions in which a student attends a lecture or class are exchange transactions and are not joint activities. Such transactions are joint activities only if the activity includes fundraising. ##### [720-958-55-23](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e6f5120086260c89f6794769ce2580e6de25d03229559d22d230b48988c3ed07 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some NFPs have missions that include educating the public (students) in areas other than causes. Paragraph [958-720-55-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-4) provides that, for those entities, educating the audience in areas other than causes or motivating the audience to engage in specific activities, such as attending a lecture or class, that will educate them in areas other than causes is considered a call for specific action by the recipients that will help accomplish the NFP's mission. Educating the audience about causes or motivating the audience to engage in specific activities that will educate them about causes without educating them in other subjects is not considered a call for specific action by the audience that will help accomplish the NFP's mission. ##### [720-958-55-24](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:64877019061afa80d2b8d4175367beb240c85e1b9bf53ddc636e99253c50caa7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An example of a lecture or class that will educate students in an area other than causes is a lecture on the nesting habits of the bald eagle, given by the Save the Bald Eagle Society, an NFP whose mission is to save the bald eagle from extinction and educate the public about the bald eagle. An example of a lecture or class that will address particular causes is a lecture by the Bald Eagle Society on the potential extinction of bald eagles and the need to raise contributions to prevent their extinction. For purposes of applying this guidance, motivating the audience to attend a lecture on the nesting habits of the bald eagle is a call for specific action that will help accomplish the NFP's mission. If the lecture merely addresses the potential extinction of bald eagles and the need to raise contributions to prevent their extinction, without addressing the nesting habits of the bald eagle, motivating the audience to attend the lecture is not considered a call for specific action by the recipient that will help accomplish the NFP's mission. ##### [720-958-55-25](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:2ba483ac6f3ea9ed822521123164a8e8655faf958c5b41fa6c381b3a93d62b7a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [958-720-55-26 through 55-31](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-26) provide some commonly used cost allocation methods. ##### [720-958-55-26](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9d2bb9d5fc9af778a89ebaafd7ef0d8f5a4f8da8ee38b92f9dd456fa4ab59123 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Joint costs are allocated to materials and activities in proportion to the number of units of output that can be attributed to each of the materials and activities. Examples of units of output are lines, square inches, and physical content measures. This method assumes that the benefits received by the fundraising, program, or management and general component of the materials or activity from the joint costs incurred are directly proportional to the lines, square inches, or other physical output measures attributed to each component of the activity. This method may result in an unreasonable allocation of joint costs if the units of output (for example, line counts) do not reflect the degree to which costs are incurred for the joint activity. Use of the physical units method may also result in an unreasonable allocation if the physical units cannot be clearly ascribed to fundraising, program, or management and general. For example, direct mail and telephone solicitations sometimes include content that is not identifiable with fundraising, program, or management and general; or the physical units of such content are inseparable. ##### [720-958-55-27](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9ea4c7918eb13727b628c12825ecc535b0cedf0cec4c8b9e9d14a85143061c82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, assume a direct mail campaign is used to conduct programs of the NFP and to solicit contributions to support the NFP and its programs. Further, assume that the appeal meets the criteria for allocation of joint costs to more than one function. The letter and reply card include a total of 100 lines; 45 lines pertain to program because they include a call for action by the recipient that will help accomplish the NFP's mission, while 55 lines pertain to the fundraising appeal. Accordingly, 45 percent of the costs are allocated to program and 55 percent to fundraising. ##### [720-958-55-28](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-28) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:051cfaeba9abcbf13c78a4ec82fd8c55d9a6d281bc87f2696cbe4023e45d5fb9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Joint costs are allocated to each of the components on the basis of their respective direct costs. Direct costs are those costs that are incurred in connection with the multipurpose materials or activity and that are specifically identifiable with a function (program, fundraising, or management and general). This method may result in an unreasonable allocation of joint costs if the joint costs of the materials and activity are not incurred in approximately the same proportion and for the same reasons as the direct costs of the materials and activity. For example, if a relatively costly booklet informing the reader about the NFP's mission (including a call for action by the recipient that will help accomplish the NFP's mission) is included with a relatively inexpensive fundraising letter, the allocation of joint costs based on the cost of these pieces may be unreasonable, particularly if the booklet and letter weigh approximately the same and therefore contribute equally to the postage costs. ##### [720-958-55-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-29) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:c0cb92ebc611c04b4d60add767ed3874bdf65973d8ce931ddb4dc5b3166af114 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, the costs of a direct mail campaign that can be specifically identified with [program services](https://asc.understandingaccounting.org/glossary/p/#program-services "The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the not-for-profit entity (NFP) exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.") are the costs of separate program materials and a postcard that calls for specific action by the recipient that will help accomplish the NFP's mission. They total $20,000. The direct costs of the fundraising component of the direct mail campaign consist of the costs to develop and produce the fundraising letter. They total $80,000. Joint costs associated with the direct mail campaign total $40,000 and would be allocated as follows under the relative direct cost method: 1. a Program services: $20,000/$100,000 x $40,000 = $8,000 2. b Fundraising: $80,000/$100,000 x $40,000 = $32,000. ##### [720-958-55-30](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-30) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9a64344b7c468f95d95d7ff1e49617a90e7680996b0179dec67dd547850e4b95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Joint costs are allocated to each component of the activity based on a ratio that uses estimates of costs of items included in joint costs that would have been incurred had the components been conducted independently. The numerator of the ratio is the cost (of items included in joint costs) of conducting a single component independently. The denominator is the cost (of items included in joint costs) of conducting all components independently. This method assumes that efforts for each component in the standalone situation are proportionate to the efforts actually undertaken in the joint cost situation. This method may result in an unreasonable allocation because it ignores the effect of each function, which is performed jointly with other functions, on other such functions. For example, the programmatic impact of a direct mail campaign or a telemarketing phone message may be significantly lessened when performed in conjunction with a fundraising appeal. ##### [720-958-55-31](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-31) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:577a43a519c33a1cb27bdab7a30777a9da6b25d9327a866080e6e64b2dfcf8d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, assume that the joint costs associated with a direct mail campaign including both program and fundraising components are the costs of stationery, postage, and envelopes at a total of $100,000. The costs of stationery, postage, and envelopes to produce and distribute each component separately would have been $90,000 for the program component and $70,000 for the fundraising component. Under the standalone joint cost allocation method, the $100,000 in joint costs would be allocated as follows: 1. a Program services: $90,000/$160,000 x $100,000 = $56,250 2. b Fundraising: $70,000/$160,000 x $100,000 = $43,750. ##### [720-958-55-32](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-32) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:6e0dac23b604b7c6fa62a6f2b5514a4a983242a57d0a800eeb12105f143d2c3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some costs, such as utilities, rent, and insurance, commonly referred to as indirect costs, may be joint costs. For example, the telephone bill for a department that, among other things, prepares materials that include both fundraising and program components may commonly be referred to as an indirect cost. Such telephone bills may also be joint costs. ##### [720-958-55-33](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-33) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:376d87a4f23bbfb83af1ec3c111fcf1bdbea81c7514d98581b4efb22ecc11d39 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, for some NFPs, it is impracticable to measure and allocate the portion of the costs that are joint costs. Considerations about which joint costs should be measured and allocated, such as considerations about materiality and the costs and benefits of developing and providing the information, are the same as considerations about cost allocations in other circumstances. ##### [720-958-55-34](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-34) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:30cbbaf3f28426713f4dd63dbe891353d4c3ba86476609aa2d333d2d9a62a2d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose for which costs other than joint costs are incurred may be fundraising, program, or management and general, depending on the context in which they are used in the activity undertaken. For example, a program-related pamphlet may be sent to an audience in need of the program. In that context, the pamphlet is used for program purposes. However, in order to demonstrate to potential donors that the NFP's programs are worthwhile, that same pamphlet may be sent to an audience that is likely to contribute, but that has no need or reasonable potential for use of the program. In that context, the pamphlet is used for fundraising. The classification of the cost of the pamphlets depends upon the use of the pamphlets and the application of the criteria in paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29), as follows: 1. a If some program-related pamphlets are used in program activities that include no fundraising, the cost of the pamphlets used in those separate program activities that include no fundraising should be charged to program. 2. b If some pamphlets are included in a joint activity and the criteria in paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29) are met, the costs of materials that accomplish program goals and that are unrelated to fundraising, including the costs of the program-related pamphlet, should be charged to program, while joint costs, such as postage, should be allocated between fundraising and program. 3. c If the program-related pamphlet is used in fundraising packets and the criteria in paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29) are not met, the costs of the pamphlets used in the fundraising packets, as well as the joint costs, should be charged to fundraising. #### Illustrations ##### [720-958-55-35](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-35) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:535c153419c5bd2e5515423fdd27eafd387e2837fe391ef4754fdfee94960e3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29) provides that all [costs of joint activities](https://asc.understandingaccounting.org/glossary/c/#costs-of-joint-activities "Costs incurred for a joint activity. Costs of joint activities may include joint costs and costs other than joint costs. Costs other than joint costs are costs that are identifiable with a particular function, such as fundraising, program, management and general, and cost of sales. For example, some costs incurred for printing, paper, professional fees, and salaries to produce donor cards are not joint costs, although they may be incurred in connection with conducting joint activities."), except for costs of goods or services provided in exchange transactions that are part of joint activities, such as costs of direct donor benefits of a special event (for example, a meal), shall be charged to fundraising if any of the criteria of purpose, audience, or content are not met. Accordingly, if one or more criteria are not met, the other criteria need not be considered. The following Examples provide conclusions about whether each of the criteria would be met in circumstances in which one or more criteria are not met in order to provide further guidance. ##### [720-958-55-36](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-36) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:85bb3cc76a1da278c12017c90b4f454f5adb0826796b00d9fab59b2fa8a181b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-37](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-37) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d7a2cb1415a96b8589fb619752a3d669c25653cd791975cfe58a5170c84c9540 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity A's (NFP A's) mission is to prevent drug abuse. NFP A's annual report states that one of its objectives in fulfilling that mission is to assist parents in preventing their children from abusing drugs. ##### [720-958-55-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-38) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:101f28ed8e86d65bfd828f8b85d9a33ddfbcdeaf522c643e7b2b25e617b8053f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP A mails informational materials to the parents of all junior high school students explaining the prevalence and dangers of drug abuse. The materials encourage parents to counsel children about the dangers of drug abuse and inform them about how to detect drug abuse. The mailing includes a request for contributions. NFP A conducts other activities informing the public about the dangers of drug abuse and encouraging parents to counsel their children about drug abuse that do not include requests for contributions and that are conducted in different media. NFP A's executive director is involved in the development of the informational materials as well as the request for contributions. The executive director's annual compensation includes a significant bonus if total annual contributions exceed a predetermined amount. ##### [720-958-55-39](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-39) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:251624a32e6bcd10648462e5e5d2e0bced8de9b1a56eb0ffaa3b05cdd2b57140 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-40](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-40) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e9f5b744e991b8aecad93ea72004a9d2f3c85a58eb503377fa24b1a24f0bf6df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (encouraging parents to counsel children about the dangers of drug abuse and informing them about how to detect drug abuse) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. (Although NFP A's executive director's annual compensation varies based on annual contributions, the executive director's compensation does not vary based on contributions raised for this discrete joint activity.) Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-41](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-41) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e261ea13de580fe8b5da60a5d225b16d74d05e6945f0ac119ef69864b956b9fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a The program component of this activity calls for specific action by the recipient (encouraging parents to counsel children about the dangers of drug abuse) that will help accomplish the NFP's mission, and it otherwise conducts the program activity in this Example without a request for contributions. 2. b Performing such programs helps accomplish NFP A's mission. (Note that had NFP A conducted the activity using the same medium on a scale that is similar to or greater than the scale on which it is conducted with the request for contributions, the purpose criterion would have been met under paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) .) ##### [720-958-55-42](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-42) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e7454ac72a1263804767537e978f5466eec61ac3d48bc652860b46979a924654 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (parents of junior high school students) is selected based on its need to use or reasonable potential for use of the action called for by the program component. ##### [720-958-55-43](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-43) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bc8a90e1b332242defebb40ee8e3039ac563ea347a113a81104105db1b06ab65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (encouraging parents to counsel children about the dangers of drug abuse and informing them about how to detect drug abuse) that will help accomplish the NFP's mission (assisting parents in preventing their children from abusing drugs), and it explains the need for and benefits of the action (the prevalence and dangers of drug abuse). ##### [720-958-55-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-44) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f1d745f5ba178a1611ebcc732b5c0c7c19e92f45f3745c78b1504a73ca4634cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-45](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-45) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9371ca0ce093491d8f591843b28284e12be5b344d380e15f2100e81c679614d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity B's (NFP B's) mission is to reduce the incidence of illness from ABC disease, which afflicts a broad segment of the population. One of NFP B's objectives in fulfilling that mission is to inform the public about the effects and early warning signs of the disease and specific action that should be taken to prevent the disease. ##### [720-958-55-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-46) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d06a649531d9d5fb3b1ea364bcd3170206c17fe41aeff0d8a83cf6172fa91565 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP B maintains a list of its prior donors and sends them donor renewal mailings. The mailings include messages about the effects and early warning signs of the disease and specific action that should be taken to prevent it. That information is also sent to a similar-sized audience but without the request for contributions. Also, NFP B believes that recent donors are more likely to contribute than nondonors or donors who have not contributed recently. Prior donors are deleted from the mailing list if they have not contributed to NFP B recently, and new donors are added to the list. There is no evidence of a correlation between recent contributions and participation in the program component of the activity. Also, the prior donors' need to use or reasonable potential for use of the messages about the effects and early warning signs of the disease and specific action that should be taken to prevent it is an insignificant factor in their selection. ##### [720-958-55-47](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-47) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:07e9de59ae2c33407e87482205ef70813e019ef01dfdca4945f78c8550e5733c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose and content criteria are met. The audience criterion is not met. All costs, including those that might otherwise be considered program or management and general costs if they had been incurred in a different activity, should be charged to fundraising. ##### [720-958-55-48](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-48) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:13b167cce346061f90e953ae151ce9a0708646d8856d290fcdb5dc4fb6d1b411 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (action that should be taken to prevent ABC disease) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. ##### [720-958-55-49](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-49) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:5acb8481d104923996965c2b924f9ee67d0789816f2993898010179ed9b4ceee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met because: 1. a The program component of the activity calls for specific action by the recipient that will help accomplish the NFP's mission (to reduce the incidence of illness from the disease). 2. b The program is also conducted using the same medium on a scale that is similar to or greater than the scale on which it is conducted with the request for contributions (a similar mailing is done without the request for contributions, to a similar-sized audience). ##### [720-958-55-50](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-50) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b8ea25ec0e1c1ce086ea9e58dc8a4df30b77f7c4c7180daf13d83a9bd5086ee7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is not met. The rebuttable presumption that the audience criterion is not met because the audience includes prior donors is not overcome in this Example. Although the audience has a need to use or reasonable potential for use of the program component, that was an insignificant factor in its selection. ##### [720-958-55-51](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-51) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:0f9a5e34d46da05d8466435630e50d2eed2c9322a98615581000b35168f9d1e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (actions to prevent ABC disease) that will help accomplish the NFP's mission (to reduce the incidence of ABC disease), and it explains the need for and benefits of the action (to prevent ABC disease). ##### [720-958-55-52](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-52) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b86be82ba10c39c3049d429d006e3e975679cb1c12a404d4e9d92e9d3ed6b322 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-53) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:6d93a4db9aa95eb1ea7f2d7679c1ce841a1d323616725a498b87f6730d3918aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity C's (NFP C's) mission is to reduce the incidence of illness from ABC disease, which afflicts a broad segment of the population. One of NFP C's objectives in fulfilling that mission is to increase governmental funding for research about ABC disease. ##### [720-958-55-54](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-54) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:2f0155a13d98d9f9ae093f2e71c01e3b2da14e5a2d46197af9d143610c5d4832 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP C maintains a list of its prior donors and its employees call them on the telephone reminding them of the effects of ABC disease, asking for contributions, and encouraging them to contact their elected officials to urge increased governmental funding for research about ABC disease. The callers are educated about ABC, do not otherwise perform fundraising functions, and are not compensated or evaluated based on contributions raised. NFP C's research indicates that recent donors are likely to contact their elected officials about such funding while nonrecent donors are not. Prior donors are deleted from the calling list if they have not contributed to NFP C recently, and new donors are added to the list. ##### [720-958-55-55](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-55) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f4d4be3078ea900c78db9edfd9a8fc1a85c8c38fbc8387d90efdb85770df215d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-56](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-56) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:1cb8cc7744f5f0abc93d391d60d9c2df80bb2b03f33defaf320965c357c64cca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (contacting elected officials concerning funding for research about ABC disease) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-57](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-57) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:0dd40907a8a61aa770aaea701d9b87b458c4b22c42bbee294f26a15f833c0b42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a The qualifications and duties of the personnel performing the activity indicate that it is a program activity (the callers are educated about ABC and do not otherwise perform fundraising functions). 2. b The method of compensation for performing the activity does not indicate that it is a fundraising activity (the employees are not compensated or evaluated based on contributions raised). 3. c Performing such programs helps accomplish NFP C's mission. ##### [720-958-55-58](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-58) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:8c1646b4e907b8ba873619128e8e0562830677034ab65217e3d83f13dac2ab80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (recent donors) is selected based on its ability to assist NFP C in meeting the goals of the program component of the activity (recent donors are likely to contact their elected officials about such funding while nonrecent donors are not). ##### [720-958-55-59](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-59) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:82c2f6311ff93a78299da2a14891c952388037b2d2f755e6cf249683df3ba604 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (contacting elected officials concerning funding for research about ABC disease) that will help accomplish the NFP's mission (to reduce the incidence of ABC disease), and it explains the need for and benefits of the action (to prevent ABC disease). ##### [720-958-55-60](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-60) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:78cf8341c7e045fbc5fbc5dd0de21ed01bda622021e27989f3d0d5eebbf32fbf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) : 1. a The purpose criterion is met (Case A). 2. b The purpose criterion is not met (Case B). ##### [720-958-55-61](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-61) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:fb712ce77271c33f99e575b75956ec8be36694d7be50ffd10db3bb3ec4abef36 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A and B have the following assumptions. ##### [720-958-55-62](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-62) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b22da9ee27f7a8479381946af5fc81ec01fe46584530f350e813d71c59502a5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity D's (NFP D's) mission is to improve the quality of life for senior citizens. One of NFP D's objectives included in that mission is to increase the physical activity of senior citizens. One of NFP D's programs to attain that objective is to send representatives to speak to groups about the importance of exercise and to conduct exercise classes. ##### [720-958-55-63](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-63) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:341c0def5bf051545fd633d77c0909539b5138a3f2e09392c44c5ccdeaa53220 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP D mails a brochure on the importance of exercise that encourages exercise in later years to residents over the age of 65 in 3 ZIP code areas. The last two pages of the four-page brochure include a perforated contribution remittance form on which NFP D explains its program and makes an appeal for contributions. The content of the first two pages of the brochure is primarily educational; it explains how seniors can undertake a self-supervised exercise program and encourages them to undertake such a program. In addition, NFP D includes a second brochure on various exercise techniques that can be used by those undertaking an exercise program. ##### [720-958-55-64](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-64) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:8214495749c267317a04aaf3ab6f0bbdddcf1f0cf0d9f2fe62a2362e2b141d10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The brochures are distributed to educate people in this age group about the importance of exercising, to help them exercise properly, and to raise contributions for NFP D. These objectives are documented in a letter to the public relations firm that developed the brochures. The audience is selected based on age, without regard to ability to contribute. NFP D believes that most of the recipients would benefit from the information about exercise. ##### [720-958-55-65](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-65) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b941bd6aa21b4fbf44536f6dfa44298fbfcc1a7c99a38c770d82b4575988181f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. (Note that the costs of the second brochure should be charged to program because all the costs of the brochure are identifiable with the program function.) ##### [720-958-55-66](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-66) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d433a35be0ffd05b95f16def691188cc3513c85ca1edb21184309d96c69eaf81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (exercising) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-67](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-67) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:588815cb27fab83525b4c80e94841f8d6fdd54279dfe6afe61ee36e1b45e1144 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a Performing such programs helps accomplish Entity D's mission. 2. b The objectives of the program are documented in a letter to the public relations firm that developed the brochure. ##### [720-958-55-68](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-68) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f8e50c8aa3cbe2d49773d554d9d0630448c6d678769b4807620de0b61c316a0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (residents over 65 in certain ZIP codes) is selected based on its need to use or reasonable potential for use of the action called for by the program component. ##### [720-958-55-69](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-69) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:02ed446693130a8f3b6572356cd0fe8567d8f5b54a4b253d7dbdc95702646674 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (exercising) that will help accomplish the NFP's mission (increasing the physical activity of senior citizens), and the need for and benefits of the action are clearly evident (explains the importance of exercising). ##### [720-958-55-70](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-70) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:28aee124d94dd2d2a335503e0ceff8fa28ed73c3abdad670728df81e58552f0e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case, NFP D employs a fundraising consultant to develop the first brochure and pays that consultant 30 percent of contributions raised. ##### [720-958-55-71](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-71) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cbcdfd61ad14740385c4dff63779cf46e9231e81fd2b582ba6d04cb5b4ed11dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content and audience criteria are met. ##### [720-958-55-72](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-72) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:977cbe79d9f1b856ca5609652f218868d59526b7379c3c40ccec1a942b213683 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is not met, however, because a majority of compensation or fees for the fundraising consultant varies based on contributions raised for this discrete joint activity (the fundraising consultant is paid 30 percent of contributions raised). All costs should be charged to fundraising, including the costs of the second brochure and any other costs that otherwise might be considered program or management and general costs if they had been incurred in a different activity. ##### [720-958-55-73](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-73) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d5ff973d7f7590f412a34d63d4fb4349c6bca77eeedd64a3a540a084fe343292 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-74](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-74) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9343bce8d9eccf7d2312a60b05213eaf6501a4207ed102768aee840068ed8c22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity E's (NFP E's) mission is to protect the environment. One of NFP E's objectives included in that mission is to take action that will increase the portion of waste recycled by the public. ##### [720-958-55-75](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-75) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:032f1c2271a53766859f28d080a2a1ff298db60bf4a9a5202777fe39e030c7b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP E conducts a door-to-door canvass of a community that recycles a low portion of its waste. The purpose of the activity is to help increase recycling by educating the community about environmental problems created by not recycling, and to raise contributions. Based on the information communicated by the canvassers, the need for and benefits of the action are clearly evident. The ability or likelihood of the residents to contribute is not a basis for communities selected, and all neighborhoods in the geographic area are covered if their recycling falls below a predetermined rate. The canvassers are selected from individuals who are well-informed about NFP E's environmental concerns and programs and who previously participated as volunteers in program activities such as answering environmental questions directed to NFP E and developing program activities designed to influence legislators to take actions addressing those concerns. The canvassers have not previously participated in fundraising activities. ##### [720-958-55-76](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-76) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3220820dfec1bd17c6a2a9ce20842e890b5221f7eeed8a4d6155eb9fefa4e290 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-77](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-77) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:533d611b71752f90825b50a8832bd18b778a0897d5ead611241ccdd646b12795 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (implicitly—to help increase recycling) that will help accomplish the entity's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-78](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-78) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bbfe6cc6fa14f35b801904ce56ba5376eb58d9b9db76791cb337998177080941 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a The qualifications and duties of the personnel performing the activity indicate that it is a program activity (the canvassers are selected from individuals who are well-informed about NFP E's environmental concerns and programs and who previously participated as volunteers in program activities such as answering environmental questions directed to NFP E and developing program activities designed to influence legislators to take actions addressing those concerns). 2. b Performing such programs helps accomplish NFP E's mission (to protect the environment). ##### [720-958-55-79](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-79) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3cc12bd26a0b139ad0b2eb65e7a080e6d67d4f996df58a80215fd1bee4d38a66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (neighborhoods whose recycling falls below a predetermined rate) is selected based on its need to use or reasonable potential for use of the action called for by the program component. ##### [720-958-55-80](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-80) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:958cfa2c65a388a7f22b728739bd894f1e2cb2ad05ce9c31bc691de83eb524d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (implicitly—to help increase recycling) that will help accomplish the NFP's mission (to protect the environment), and the need for and benefits of the action are clearly evident (increased recycling will help alleviate environmental problems). ##### [720-958-55-81](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-81) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:7632ea83ddde83ddc842000986720da8e98ed9af8d3f3146a958fedfef5c93ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-82](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-82) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bac882583e59439c052de9eb5370aac4cb9113c7c011d7ea90b0ec4e03ca3c38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity F's (NFP F's) mission is to provide summer camps for economically disadvantaged youths. Educating the families of ineligible youths about the camps is not one of the program objectives included in that mission. ##### [720-958-55-83](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-83) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d551b30c96db0d7fe2695cf25a4fe43d1b6a6fc3b074d9e02247bd5b0532b084 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP F conducts a door-to-door solicitation campaign for its camp programs. In the campaign, volunteers with canisters visit homes in middle-class neighborhoods to collect contributions. NFP F believes that people in those neighborhoods would not need the camp's programs but may contribute. The volunteers explain the camp's programs, including why the disadvantaged children benefit from the program, and distribute leaflets to the residents regardless of whether they contribute to the camp. The leaflets describe the camp, its activities, who can attend, and the benefits to attendees. Requests for contributions are not included in the leaflets. ##### [720-958-55-84](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-84) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:37522b87564e86210d22416a6f00524f7b2981735194f73584f85ae6270c09da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are not met. All costs should be charged to fundraising. ##### [720-958-55-85](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-85) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:85a18ad2718e7ab1314bf7cef76e78f032aba5ac2422e4d969846cd03ebfe1fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity does not include a call for specific action because it only educates the audience about causes (describing the camp, its activities, who can attend, and the benefits to attendees). Therefore, the purpose criterion is not met. ##### [720-958-55-86](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-86) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:0ed29fc77080cc267d3480543f64d46196e659c3eaaee8ed3a46f1f309572940 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is not met, because the audience is selected based on its ability or likelihood to contribute, rather than based on its need to use or reasonable potential for use of the action called for by the program component, or its ability to take action to assist the NFP in meeting the goals of the program component of the activity. (NFP F believes that people in those neighborhoods would not need the camp's programs but may contribute.) ##### [720-958-55-87](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-87) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:17afb4818fd0ebeb2f880ce118f1997c76ee295cef6e2c1769be76ee43936b0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is not met because the activity does not call for specific action by the recipient. (The content educates the audience about causes that the program is designed to address without calling for specific action.) ##### [720-958-55-88](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-88) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:03a9009ff722f38ac64a49c0058c9662ec56602d2b5b0abfe4cf2accee4b3b34 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-89](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-89) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:7ebe5edce815d28dc01059a0e6b4d6ca5ea37c779fd0a4e57516fd7f28bc0f0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity G's (NFP G's) mission is to educate the public about lifesaving techniques in order to increase the number of lives saved. One of NFP G's objectives in fulfilling that mission, as stated in the minutes of the board's meetings, is to produce and show television broadcasts including information about lifesaving techniques. ##### [720-958-55-90](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-90) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:c65ab471cac21e8cf59ee454296dc4c062914b1564631fb0e24219b9c306bbcf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP G conducts an annual national telethon to raise contributions and to reach the American public with lifesaving educational messages, such as summary instructions concerning dealing with certain life-threatening situations. Based on the information communicated by the messages, the need for and benefits of the action are clearly evident. The broadcast includes segments describing NFP G's services. NFP G broadcasts the telethon to the entire country, not merely to areas selected on the basis of giving potential or prior fundraising results. Also, NFP G uses national television broadcasts devoted entirely to lifesaving educational messages to conduct program activities without fundraising. ##### [720-958-55-91](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-91) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:ae6f67d5ec1b9222578d685cc5690f0f004ad3c7465b53b4fbb4f7ea150c9303 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-92](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-92) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3429e168090aadc8d182f84dd739224df40825ee67cc93abdba3a4af6ab4bf7c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (implicitly—to save lives) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. ##### [720-958-55-93](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-93) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3acc2d36cdd4094aea0a2a4d31bfb4b9ef0c24ceadf9c68c3cf465e66f5eee9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met because: 1. a The program component of the activity calls for specific action by the recipient that will help accomplish NFP G's mission (to save lives by educating the public). 2. b A similar program activity is conducted without the fundraising using the same medium and on a scale that is similar to or greater than the scale on which it is conducted with the appeal (NFP G uses national television broadcasts devoted entirely to lifesaving educational messages to conduct program activities without fundraising). ##### [720-958-55-94](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-94) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:daed504a2eac557b1b3ea8af4b2f4bdfae29c04a33b859fe036e7f892b6f2820 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (a broad segment of the population) is selected based on its need to use or reasonable potential for use of the action called for by the program activity. ##### [720-958-55-95](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-95) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:0ab10a14f0121b99f772960db487e463bf702bfaec6a807bbbb64f8a309acf9a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (implicitly—to save lives) that will help accomplish the NFP's mission (to save lives by educating the public), and the need for and benefits of the action are clearly evident (saving lives is desirable). ##### [720-958-55-96](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-96) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3b4e75fb4d694d731c7593e54ae85d323110a0cc824780236ad8b2571181f10b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-97](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-97) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:0f45e49d9c5a4ebb1c0fc553d92dcd0b8e7988bd4c575a9b91e7e936999be316 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity H's (NFP H's) mission is to provide food, clothing, and medical care to children in developing countries. ##### [720-958-55-98](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-98) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:4ebce416724f7ea344e6b4e0ee87964212dfc1bafb93d0089cd8b9d22bbed7e6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP H conducts television broadcasts in the United States that describe its programs, show the needy children, and end with appeals for contributions. NFP H's operating policies and internal management memoranda state that these programs are designed to educate the public about the needs of children in developing countries and to raise contributions. The employees producing the programs are trained in audiovisual production and are familiar with NFP H's programs. Also, the executive producer is paid $25,000 for this activity, with a $5,000 bonus if the activity raises over $1,000,000. ##### [720-958-55-99](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-99) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:56a2da40d72e9e91e2148f00d2cb8d43095b280b5443fd84f87058c533ce5fc6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are not met. All costs should be charged to fundraising. ##### [720-958-55-100](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-100) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d5b1883cf6d2340e81da88f51969e2e29a42fd13f57d3901563886fb9771458a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity does not include a call for specific action because it only educates the audience about causes (describing its programs and showing the needy children). Therefore, the purpose criterion is not met. Also, note that if the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) were considered, it would not be determinative of whether the purpose criterion is met. Although the executive producer will be paid $5,000 if the activity raises over $1,000,000, that amount would not be a majority of the executive producer's total compensation for this activity, because $5,000 would not be a majority of the executive producer's total compensation of $30,000 for this activity. Also, note that if other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , were considered, the purpose criterion would not be met based on the other evidence. Although the qualifications and duties of the personnel performing the activity indicate that the employees producing the program are familiar with NFP H's programs, the facts that some, but less than a majority, of the executive producer's compensation varies based on contributions raised, and that the operating policies and internal management memoranda state that these programs are designed to educate the public about the needs of children in developing countries (with no call for specific action by recipients) and to raise contributions, indicate that the purpose is fundraising. ##### [720-958-55-101](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-101) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:2691e1e9fd1b9fe4feaaab96b0f71beaa2a8fcfbd64710959bf21f50d9c5f1dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is not met because the audience is selected based on its ability or likelihood to contribute, rather than based on its need to use or reasonable potential for use of the action called for by the program component, or its ability to take action to assist the NFP in meeting the goals of the program component of the activity. (The audience is a broad segment of the population of a country that is not in need of or has no reasonable potential for use of the program activity.) ##### [720-958-55-102](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-102) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:723143a360dd924f5781a4eed1d9a9f4e63e455e065ac84dedcdf7fa44113706 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is not met because the activity does not call for specific action by the recipient that will help accomplish the NFP's mission. (The content educates the audience about the causes without calling for specific action.) ##### [720-958-55-103](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-103) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:1b091fc1e5e7a25033dee9e0076bb70df4b2094795d9c5ece15ef70c2e35a8c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-104](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-104) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:c68254f77a8d64ff73112bc8330bbf4304899e81f68836f04322caf491541e6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity I (NFP I) is a university that distributes its annual report, which includes reports on mission accomplishments, to those who have made significant contributions over the previous year, its board of trustees, and its employees. The annual report is primarily prepared by management and general personnel, such as the accounting department and executive staff. The activity is coordinated by the public relations department. Internal management memoranda indicate that the purpose of the annual report is to report on how management discharged its stewardship responsibilities, including the university's overall performance, goals, financial position, cash flows, and results of operations. Included in the package containing the annual report are requests for contributions and donor reply cards. ##### [720-958-55-105](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-105) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:5f2a5d29237fbc69a8b0f08443a20b42b99cad72ca5ce2a2a1b22c83a72cb76a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-106](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-106) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:666aab4ed881f49f573fe716e4f3dc81da643cbf59120b050ffa404a09e4dbd2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity has elements of management and general functions. Therefore, no call for specific action is required. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-107](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-107) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:57c757842f1a798190bce95e26be273f2e00905de2b2f7c48293c437084cffc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a The employees performing the activity are not members of the fundraising department and perform other nonfundraising activities. 2. b Internal management memoranda indicate that the purpose of the annual report is to fulfill one of the university's management and general responsibilities. ##### [720-958-55-108](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-108) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:73fd3057e09cdd19d7a9628d81461d3ef1ad04937fb29e5733081e6df1f0b6bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience is selected based on its reasonable potential for use of the management and general component. Although the activity is directed primarily at those who have previously made significant contributions, the audience was selected based on its presumed interest in NFP I's annual report (prior donors who have made significant contributions are likely to have an interest in matters discussed in the annual report). ##### [720-958-55-109](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-109) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:6ffad01ca62e7f443a4964c512afa0abe9b24e5745f4658bd4535aff43208c13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity (distributing annual reports) fulfills one of the NFP's management and general responsibilities (reporting concerning management's fulfillment of its stewardship function). ##### [720-958-55-110](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-110) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:ffe60c22300e59867c6fdba563fd39f91bda2afb08b5ec7d2df2ee93021ac171 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-111](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-111) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:267f36c9fc170488e29b67fbd245359a163f34650186493b247ebabaaa4d0578 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with internal management memoranda documenting its policies requiring it to comply with IRS regulations, Not-for-Profit Entity J (NFP J) mails prior donors the contribution substantiation documentation required by the IRS. The documentation is included on a perforated piece of paper. The information above the perforation line pertains to the documentation required by the IRS. The information below the perforation line includes a request for contributions and may be used as a donor reply card. ##### [720-958-55-112](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-112) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f7886525a8474d25f8f26a06aba9ee27fc733b38bdcd902b93698e398c0d4037 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. (Note that the costs of the information below the perforation line are identifiable with fundraising and therefore should be charged to fundraising.) ##### [720-958-55-113](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-113) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:7269c5e75fcb99476e4b39b97a96638fa2a9382f7e083b815795f32b75ceb1c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity has elements of management and general functions. Therefore, no call for specific action is required. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-114](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-114) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:126eb6fa61e01e67fcdb5d2953266a023ff0b1af06304c2b7c493cb8343862fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because internal management memoranda indicate that the purpose of the activity is to fulfill one of NFP J's management and general responsibilities. ##### [720-958-55-115](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-115) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:98d23109ec3c441339ba5e41a6dbb6ec3342a3f2a05f5cb571e38dc427652436 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the NFP is required to direct the management and general component of the activity to the particular audience. Although the activity is directed at those who have previously contributed, the audience was selected based on its need for the documentation. ##### [720-958-55-116](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-116) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:ffe01be868f1a49477c44f6609e7d42c1cfe4e4c6dcdfc0a611b3bf73847341d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity (sending documentation required by the IRS) fulfills one of the NFP's management and general responsibilities (complying with IRS regulations). ##### [720-958-55-117](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-117) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e63aba35bffc759ffa2af0e7ae07b577f1f771b36e188a607bd7c94e6f142f27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-118](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-118) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3a8017a81773abfd54af9ed935fc79a68cf998ac8bcc16ea4b92e0da33a4a433 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity K is an animal rights organization. It mails a package of material to individuals included in lists rented from various environmental and other NFPs that support causes that NFP K believes are congruent with its own. In addition to donor response cards and return envelopes, the package includes materials urging recipients to contact their legislators and urge the legislators to support legislation to protect those rights, and postcards addressed to legislators urging support for legislation restricting the use of animal testing for cosmetic products. The mail campaign is part of an overall strategy that includes magazine advertisements and the distribution of similar materials at various community events, some of which are undertaken without fundraising appeals. The advertising and community events reach audiences similar in size and demographics to the audience reached by the mailing. ##### [720-958-55-119](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-119) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:042419a4056d6c15f3b653cab8ba26717e480cf2a3c2c21a17d81a8b9d744681 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-120](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-120) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9097429c478c6d05da9c7e08d346104cb5685373b6d79d4ae46c7d6a8cc067a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (mailing postcards to legislators urging support for legislation restricting the use of animal testing for cosmetic products) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) should be considered. ##### [720-958-55-121](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-121) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9c52c13edc0cbb125025bec0a6e2845fa30753a3d7f3931a982f1b90507da388 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a The program component of this activity calls for specific action by the recipient that will help accomplish the NFP's mission, and it otherwise conducts the program activity in this Example without a request for contributions. 2. b Performing such programs helps accomplish NFP K's mission. ##### [720-958-55-122](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-122) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e11c0f86d0fafbbdfd181bf3344e70838dc29b443647c99b9049643522ef8d17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (individuals included in lists rented from various environmental and other NFPs that support causes that NFP K believes are congruent with its own) is selected based on its ability to take action to assist the NFP in meeting the goals of the program component of the activity. ##### [720-958-55-123](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-123) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cb79e4092b8ae1b2d43aa7131b94c8015e12c534e13e1abbce61ff897530cefa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (mailing postcards to legislators urging support for legislation restricting the use of animal testing for cosmetic products) that will help accomplish the NFP's mission (to protect animal rights), and the need for and benefits of the action are clearly evident (to protect animal rights). ##### [720-958-55-124](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-124) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:12ba87cc0a265c2521a9dedef341ec01de3548f44d3caab72b78e66d957fac45 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-125](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-125) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:598f11b15aa66d48ce2797d4ee886a7b1ad95419905dd6c335e12eaf1a4d598c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity L is a performing arts organization whose mission is to make the arts available to residents in its area. NFP L charges a fee for attending performances and sends advertisements, including subscription forms, for the performances to residents in its area. These advertisements include a return envelope with a request for contributions. NFP L evaluates the effectiveness of the advertising based on the number of subscriptions sold as well as contributions received. In performing that evaluation, NFP L places more weight on the number of subscriptions sold than on the contributions received. Also, NFP L advertises the performances on local television and radio without a request for contributions but on a smaller scale than the mail advertising. ##### [720-958-55-126](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-126) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cfd7c7cc49d52cdcfe9248960ca8a33947234f5ea8840b90173bce8cb75f0b35 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-127](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-127) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cc5892189b4d5a23c69b0c930e202532cb4503c5561122a8918487daf2ef50e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (attending the performances) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-128](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-128) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:2e49b0489cb49b7a9b909600ec443df34cf4d806f2e5ead9ceba0bda5e8447b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a NFP L measures program results and accomplishments of the joint activity and in evaluating the effectiveness of the activity, the NFP places significantly greater weight on the activity's effectiveness in accomplishing program goals than on the activity's effectiveness in raising contributions (NFP L evaluates the effectiveness of the advertising based on the number of subscriptions sold as well as contributions received and places more weight on the number of subscriptions sold than on the contributions received). 2. b It otherwise conducts the program activity without a request for contributions. 3. c Performing such programs helps accomplish NFP L's mission (to make the arts available to residents in its area). ##### [720-958-55-129](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-129) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cab0b493c12b7db1976fe67e9ea6cddcc86286fcf1f2eff984aaaf64c2d3e788 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (a broad segment of the population in NFP L's area) is selected based on its need to use or reasonable potential for use of the action called for by the program component. ##### [720-958-55-130](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-130) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:ec23ec11c7e76426f091f0ab3c594d936a546112825258cb0f6d42a20d670a95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (attending the performances) that will help accomplish the NFP's mission (making the arts available to area residents), and the need for and benefits of the action are clearly evident (attending the performance is a positive cultural experience). (Note that the purchase of subscriptions is an exchange transaction and, therefore, is not a contribution.) ##### [720-958-55-131](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-131) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e84ac5d3719c62b480e0c931095951dfe0442e7e27ff19597deb457e2ef1ac41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-132](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-132) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bfc989a75e31946ff61567e3160040fbcaf11937efbf6c7b0d31accfc4ce2645 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity M (NFP M) is a university whose mission is to educate the public (students) in various academic pursuits. NFP M's political science department holds a special lecture series in which prominent world leaders speak about current events. The speakers command relatively high fees and, in order to cover costs and make a modest profit, the university sets a relatively expensive fee to attend. However, the tickets are priced at the fair value of the lecture and no portion of the ticket purchase price is a contribution. NFP M advertises the lectures by sending invitations to prior attendees and to prior donors who have contributed significant amounts, and by placing advertisements in local newspapers read by the general public. At some of the lectures, including the lecture being considered in this Example, deans and other faculty members of NFP M solicit significant contributions from attendees. Other lectures in the series are conducted on a scale similar to the scale of the lecture in this Example without requesting contributions. NFP M's records indicate that historically 75 percent of the attendees have attended prior lectures. Of the 75 percent who have attended prior lectures, 15 percent have made prior contributions to NFP M. Of the 15 percent who have made prior contributions to NFP M, 5 percent have made contributions in response to solicitations made at the events. (Therefore, one-half of 1 percent of attendees make contributions in response to solicitations made at the events. However, those contributions are significant.) Overall, the audience's ability or likelihood to contribute is an insignificant factor in its selection. NFP M evaluates the effectiveness of the activity based on the number of tickets sold, as well as contributions received. In performing that evaluation, NFP M places more weight on the number of tickets sold than on the contributions received. ##### [720-958-55-133](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-133) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f580887fd4cc27e41f7adbe0720a0da67a550e73dc487b4ea73d8b3b51d550d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. The purchase of the tickets is an exchange transaction and, therefore, is not a contribution. As discussed in paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29), costs of goods or services provided in exchange transactions that are part of joint activities, such as costs of direct donor benefits of a special event, should not be reported as fundraising. Paragraph [958-220-45-19](https://asc.understandingaccounting.org/asc/220/958/#220-958-45-19) provides guidance concerning reporting special events. ##### [720-958-55-134](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-134) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3fda79f2edef5fc223d989f54ce7abbe0feddcc1e54bfce4d23afa5db02e0a27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (attending the lecture) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. ##### [720-958-55-135](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-135) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:baf25e5fe1714bd5303777f300477acccc59eb9ab294ece9e3e16d36792f8c0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met because: 1. a The program component of the activity calls for specific action by the recipient that will help accomplish the NFP's mission (educating the public \[students\] in various academic pursuits). 2. b The program is also conducted using the same medium on a scale that is similar to or greater than the scale on which it is conducted with the request for contributions (other lectures in the series are conducted on a scale similar to the scale of the lecture in this Example without requesting contributions). ##### [720-958-55-136](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-136) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:099bf2057c0c8b2fdaa3103833a0d9750a83264dba6077ba8389a9455a8608f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met. The rebuttable presumption that the audience criterion is not met because the audience includes prior donors is overcome in this Example because the audience (those who have shown prior interest in the lecture series, prior donors, a broad segment of the population in NFP M's area, and those attending the lecture) is also selected for its reasonable potential for use of the program component (attending the lecture). Although the audience may make significant contributions, that was an insignificant factor in its selection. ##### [720-958-55-137](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-137) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:f9b91803f76c6f684ef43a069d1294bb0227a35b79f931346c70401e59dba5e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (attending the lecture) that will help accomplish the NFP's mission (educating the public \[students\] in various academic pursuits), and the need for and benefits of the action are clearly evident (attending the lecture is a positive educational experience). ##### [720-958-55-138](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-138) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:73bccde555dadee5f5bed9aa5e32e239d1ba04d438f9fbd76b928e99572446bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-139](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-139) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:6df8e6bb0022df63a50acaddeaacab5cda47c25ade642e97fa8de547e6fd1da3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity N (NFP N) is a university whose mission is to educate the public (students) in various academic pursuits. NFP N's political science department holds a special lecture series in which prominent world leaders speak about current events. Admission is priced at $250, which is above the $50 fair value of the lecture and, therefore, $200 of the admission price is a contribution. Therefore, the audience's likelihood to contribute to the NFP is a significant factor in its selection. NFP N advertises the lectures by sending invitations to prior attendees and to prior donors who have contributed significant amounts, and by placing advertisements in local newspapers read by the general public. NFP N presents similar lectures that are priced at the fair value of those lectures. ##### [720-958-55-140](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-140) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:242dbac8fa08086f21ffc133dc9bf4bf42d5a9a6ee42b501e917d35a6845d7a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose and content criteria are met. The audience criterion is not met. All costs, including those that might otherwise be considered program or management and general costs if they had been incurred in a different activity, except for the costs of the direct donor benefit (the lecture), should be charged to fundraising. The purchase of the tickets is an exchange transaction and, therefore, is not a contribution. As discussed in paragraph [958-720-45-29](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-29), costs of goods or services provided in exchange transactions that are part of joint activities, such as costs of direct donor benefits of a special event, shall not be reported as fundraising. Paragraph [958-720-45-17](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-17) provides guidance concerning reporting special events. ##### [720-958-55-141](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-141) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:40743064044b5bc54bc60d60ae8c993b260f1015a3541c61a969fdbbbf5d888d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (attending the lecture) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. ##### [720-958-55-142](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-142) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:bbc280388858c701f55470321ea184474f6905d3b34ddc49485825d2f17cd462 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met because: 1. a The program component of the activity calls for specific action by the recipient that will help accomplish the NFP's mission (educating the public \[students\] in various academic pursuits). 2. b The program is also conducted using the same medium on a scale that is similar to or greater than the scale on which it is conducted with the request for contributions (other lectures in the series are conducted on a scale similar to the scale of the lecture in this Example without including a contribution in the admission price). ##### [720-958-55-143](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-143) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:cab2856eb485979cc09a38f68096cb09a7e4c68ca7ebe4c45005777704cae707 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is not met. The rebuttable presumption that the audience criterion is not met because the audience is selected based on its likelihood to contribute to the NFP is not overcome in this Example. The fact that the $250 admission price includes a $200 contribution leads to the conclusion that the audience's ability or likelihood to contribute is an overwhelmingly significant factor in its selection, whereas there is no evidence that the extent to which the audience is selected for its need to use or reasonable potential for use of the action called for by the program component (attending the lecture) is overwhelmingly significant. ##### [720-958-55-144](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-144) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e105135365bb20e97e7686b9a93bb4d8018eafb65083dc6f77eb997b920e36c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (attending the lecture) that will help accomplish the NFP's mission (educating the public \[students\] in various academic pursuits), and the need for and benefits of the action are clearly evident (attending the lecture is a positive educational experience). ##### [720-958-55-145](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-145) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:5020b6e8172f338d2945c0c333d60b50b221d1947bd87028433f53903467955f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-146](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-146) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e72322337d5f88ce2857f07720782b5359b46f0ee677bc040a866184fc212d19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity O's (NFP O's) mission is to reduce the incidence of illness from ABC disease, which primarily afflicts people over 65 years of age. One of NFP O's objectives in fulfilling that mission is to have all persons over 65 screened for ABC disease. ##### [720-958-55-147](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-147) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:10e152c91414b245332c37def96618e96951da06c7ac0bf71eb55e9659faf89c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. NFP O rents space at events attended primarily by people over 65 years of age and conducts free screening for ABC disease. NFP O's employees, who are educated about ABC disease and screening procedures and do not otherwise perform fundraising functions, educate interested parties about the effects of ABC disease and the ease and benefits of screening for it. NFP O also solicits contributions at the events. The effectiveness of the activity is evaluated primarily based on how many screening tests are performed, and only minimally based on contributions raised. The employees are not compensated or evaluated based on contributions raised. ##### [720-958-55-148](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-148) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:297fef89b341ad93a27044877979a9a09798c8d699796aade2ac3fb34cdf7b06 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. ##### [720-958-55-149](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-149) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:1c18faa34fd16ef284793895afe20e1b47f0139041940d471a31e4318170100d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (being screened for ABC disease) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. Neither of the factors in paragraphs [958-720-45-40 through 45-44](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-40) nor those in paragraphs [958-720-45-45 through 45-46](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-45) are determinative of whether the purpose criterion is met. Therefore, other evidence, such as the indicators in paragraphs [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) , should be considered. ##### [720-958-55-150](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-150) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:102cea7a0b36feeea143bf4c8c1fffcd70b3a5d831119e54204711cf33d2d080 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met based on the other evidence, because: 1. a A process exists to evaluate measured program results and accomplishments and in evaluating the effectiveness of the joint activity, the NFP places significantly greater weight on the activity's effectiveness in accomplishing program goals than on the activity's effectiveness in raising contributions (NFP O evaluates the effectiveness of the activity based on the number of screening tests conducted as well as contributions received and places more weight on the number of tests conducted than on the contributions received). 2. b The qualifications and duties of the personnel performing the activity indicate that it is a program activity (the employees are educated about ABC disease and the testing procedures and do not otherwise perform fundraising functions). 3. c The method of compensation for performing the activity does not indicate that it is a fundraising activity (the employees are not compensated or evaluated based on contributions raised). 4. d Performing such programs helps accomplish NFP O's mission (to prevent ABC disease). ##### [720-958-55-151](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-151) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:1f2b470c31df1d6d671247167c793a9595bb946a75d74ca923cbfa000182bb87 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met because the audience (people over 65 years of age) is selected based on its need to use or reasonable potential for use of the action called for by the program component. ##### [720-958-55-152](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-152) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:461ef986036fafb005803c086ceccfacf7a0e25ba50f3cc0f41914f6af84f03b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (being screened for ABC disease) that will help accomplish the NFP's mission (to reduce the incidence of ABC disease), and it explains the need for and benefits of the action (to prevent ABC disease). ##### [720-958-55-153](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-153) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:1caa55b789dbfe67911ffcc08decf143cf0ac78f660ffb5023574d7cff9573c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [958-720-45-33 through 45-53](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-33) and [958-720-55-6 through 55-9](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-6) . ##### [720-958-55-154](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-154) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d55af1ab3e681a9a2c76c30d128f04d64b13eeaf4eb8a9ddde4ff153325cd532 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity P's (NFP P's) mission is to provide cultural and educational television programming to residents in its area. NFP P owns a public television station and holds a membership drive in which it solicits new members. The drive is conducted by station employees and consists of solicitations that are shown during long breaks between the station's regularly scheduled programs. NFP P's internal management memoranda state that these drives are designed to raise contributions. NFP P evaluates the effectiveness of the activity based on the amount of contributions received. NFP P shows the programs on a similar scale, without the request for contributions. The audience is members of the general public who watch the programs shown during the drive. Station member benefits are given to those who contribute and consist of tokens of appreciation with a nominal value. ##### [720-958-55-155](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-155) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:14f125642d8714a90c5bb659fb10209632965e39ca449f74b3c719e1b2cad235 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose, audience, and content criteria are met, and the joint costs should be allocated. (Note that there would be few, if any, joint costs. Costs associated with the fundraising activities, such as costs of airtime, would be separately identifiable from costs of the program activities, such as licensing costs for a particular television program. Also, note that because no significant benefits or duties are associated with membership, member dues are contributions. Therefore, the substance of the membership-development activities is, in fact, fundraising.) ##### [720-958-55-156](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-156) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:791febfe3ffbe16113f7067dfde1d5966f85829ce371895e8f4905db064bc573 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The activity calls for specific action by the recipient (watching the television program) that will help accomplish the NFP's mission. Therefore, the guidance in paragraph [958-720-45-38](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-38) should be considered. ##### [720-958-55-157](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-157) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:47d3becc12ebb0733f08882540487ebf80da4a1df08794a1d3c775148ddd84dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The purpose criterion is met because: 1. a The program component of the activity calls for specific action by the recipient that will help accomplish the NFP's mission. 2. b The program is also conducted using the same medium on a scale that is similar to or greater than the scale on which it is conducted with the request for contributions (NFP P shows the television programs on a similar scale, without the request for contributions). ##### [720-958-55-158](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-158) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:430e3486c5439ba5cb1b2a1b17dfb36f2e63f4aa4d62f588026f045323407ba0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The audience criterion is met. The rebuttable presumption that the audience criterion is not met because the audience is selected based on its likelihood to contribute is overcome in this Example because the audience (members of the general public who watch the television programs shown during the drive) is also selected for its reasonable potential for use of the program component (watching the television programs). Although the audience may make contributions, that was an insignificant factor in its selection. ##### [720-958-55-159](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-159) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:d2965f0859c5429cfa68872902b40bfe74639bd89f61631a4122a91d349301f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content criterion is met because the activity calls for specific action by the recipient (watching the television programs) that will help accomplish the NFP's mission (providing cultural and educational television programming to residents in its area), and the need for and benefits of the action are clearly evident (watching the programs is a positive cultural and educational experience). ##### [720-958-55-160](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-160) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:c3e852d346d06e29d091f0d3d194e4f226a7e4edc7aeec98996535adfec1300f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides an illustration of incidental activities covered in paragraph [958-720-45-55](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-55). ##### [720-958-55-161](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-161) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:39b58bfab52ab1819092b465cac3d78c6eb98084946c87c31e427797f4bca4a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity Q (NFP Q) conducts a fundraising activity by including a generic message, "Contributions to NFP Q may be sent to \[address\]" on a small area of a message that would otherwise be considered a program or management and general activity based on its purpose, audience, and content. That fundraising activity likely would be considered incidental to the program or management and general activity being conducted. ##### [720-958-55-162](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-162) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:75ec6d3bb9177934b2d266a35c144b7da4044698758c33f518156b1880c20168 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides an illustration of incidental activities covered in paragraph [958-720-45-55](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-55). ##### [720-958-55-163](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-163) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:5c465e828acad2333e78eeb31a673ac33d1080daebc70751126874b653e3a732 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity R conducts a program activity by including a generic program message such as "Continue to pray for \[a particular cause\]" on a small area of a message that would otherwise be considered fundraising based on its purpose, audience, and content. That program activity would likely be considered incidental to the fundraising activity being conducted. ##### [720-958-55-164](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-164) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:e93ae89529d3b36c972ff657e465d919fba885b48663b2d783839621fc13fac6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides an illustration of incidental activities covered in paragraph [958-720-45-55](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-55). ##### [720-958-55-165](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-165) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:7a7a617ca1892a6ef822dd6f07879be3c55259be3de66dd0d50a2b900d3c2418 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity S conducts a management and general activity by including a brief management and general message—"We recently changed our phone number. Our new number is 123-4567"—on a small area of a message that would otherwise be considered a program or fundraising activity based on its purpose, audience, and content. That management and general activity would likely be considered incidental to the program or fundraising activity being conducted. ##### [720-958-55-166](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-166) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:232ff6f8b530e9bd9fe2fb6cb5d05fc9813e5184a5cdc520fc45b9c078b0e17b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosures discussed in paragraph [958-720-50-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-50-2) are illustrated in the following Cases: 1. a Narrative format (Case A) 2. b Tabular format (Case B). ##### [720-958-55-167](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-167) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:7e001ba0832778f005b6deb0b21446ab07014056137a09e4f18f0bdfd3b4fa29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following shows the required and encouraged information in narrative format. - Note X. Allocation of Joint Costs - In 19XX, Not-for-Profit Entity T conducted activities that included requests for contributions, as well as program and management and general components. Those activities included direct mail campaigns, special events, and a telethon. The costs of conducting those activities included a total of $310,000 of joint costs, which are not specifically attributable to particular components of the activities (joint costs). \[Joint costs for each kind of activity were $50,000, $150,000, and $110,000 respectively.\] These joint costs were allocated as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-148FD632-72CF-4352-A3B3-7E982F911AE1-low.gif) Fund raising " $180,000 " Program A " 80,000 " Program B " 40,000 " Management and general " 10,000 " Total " $310,000 " ##### [720-958-55-168](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-168) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:9f7b28be278fe700ad8370377ae0839e964aa0faa1210475cf4415077ac718f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Note that the bracketed sentence is a disclosure that is encouraged but not required. ##### [720-958-55-169](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-169) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:3d0c6f9b2a7e10096e0c945a9042f90a49bda9aa6060394a7553160be767e3ce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following reports that information in tabular format, as well as information concerning joint costs incurred for each kind of activity by [functional expense classification](https://asc.understandingaccounting.org/glossary/f/#functional-expense-classification "A method of grouping expenses according to the purpose for which costs are incurred. The primary functional classifications of a not-for-profit entity are program services and supporting activities."), which is neither required nor encouraged, but which is not prohibited. - Note X. Allocation of Joint Costs - In 19XX, Not-for-Profit Entity T conducted activities that included appeals for contributions and incurred joint costs of $310,000. These activities included direct mail campaigns, special events, and a telethon. Joint costs were allocated as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-C1FE169F-24FC-4E1B-A341-4C184FF0C84C-low.gif) Direct Mail Special Events Telethon Total Fund raising " $40,000 " " $50,000 " " $90,000 " " $180,000 " Program A " 10,000 " " 65,000 " " 5,000 " " 80,000 " Program B " 25,000 " " 15,000 " " 40,000 " Management and general " 10,000 " " 10,000 " Total " $50,000 " " $150,000 " " $110,000 " " $310,000 " ##### [720-958-55-170](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-170) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:78f2b403a3b4afd2b0948e8ad5527b60024a24a924b99f7382c1cffcc3318fec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Note that shading is used to highlight information that is neither required nor encouraged, but which is not prohibited. However, NFPs may prefer to disclose it. Disclosing the total joint costs for each kind of activity ($50,000, $150,000, and $110,000) is encouraged but not required. ##### [720-958-55-171](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-171) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b52eb6a79f56e8850d87e2796cda2fc048280d73e940cdc7e8c4f6cfeca656f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases represent certain activities to illustrate direct conduct and direct supervision of program or support activities and, therefore, should be allocated to the program or support function or functions that receive a benefit in accordance with paragraph [958-720-45-7(k)](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-7). ##### [720-958-55-172](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-172) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:b76e86bfcb25ef92dd88ad7fc4e6cddd8a40d23bdf3a9b2ffe3346bec42fedb3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The broad responsibilities of a chief executive officer generally include administrative and programmatic oversight. At Not-for-Profit Entity A (NFP A), the chief executive officer spends a portion of time directly overseeing the research program. Additionally, a portion of time is spent with current and potential donors on fundraising cultivation activities. A portion of the chief executive officer's compensation and benefits and other expenses would be allocated to the research program and to the fundraising function representing the portion of time spent on those activities because they reflect direct conduct or direct supervision. If the remainder of the chief executive officer's time is spent indirectly supervising the other areas of NFP A, including the administrative areas, those activities would not constitute direct conduct or direct supervision, and the ratable portion of compensation and benefit amounts would remain in management and general activities. ##### [720-958-55-173](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-173) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:33c8f1402584ffef53ea389221148c815b7f4a7fcc23daa0676dff8680ede62a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The chief financial officer at Not-for-Profit Entity B (NFP B) has primary responsibility for (a) accounting and reporting, (b) short-term budgeting and long-term financial planning, (c) cash management, and (d) direct oversight of NFP B's endowment. A portion of the chief financial officer's compensation and benefits and other expenses would be allocated to management and general activities for the accounting and reporting, the short-term budgeting and long-term financial planning, and cash management functions because they benefit the overall organization. A portion also would be allocated to investment expenses for management of the investment strategy of the endowment and would be netted against investment return. However, any portion of time spent supervising the accounting for investments or other fiduciary oversight would not be allocated to investment expenses because that time is related to an accounting and general management activity that benefits the overall organization and should be allocated to management and general activities. ##### [720-958-55-174](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-174) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:91bb69017b977e75344fff2568ce5c416a0191650069fa6237fe74dc168aa56a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The human resources department at Not-for-Profit Entity C (NFP C) generally is involved in the benefits administration for all personnel of NFP C. The human resources department's related costs would not be allocated to any specific program. Rather, those costs would remain a component of management and general activities because benefits administration is a supporting activity for the entire entity. ##### [720-958-55-175](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-175) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:faf97231b824624c9c5b9d9f61b1cc2e05f9343d9f24c424e16c1c19e6c45ebb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-Profit Entity D (NFP D) receives federal grants and employs an accountant who is responsible for grant accounting and reporting. In some cases, under the terms of the grant agreement, a fiscal report is required to be filed that details expenses incurred and charged against the grant. The fiscal report is not part of the direct conduct or direct supervision of the grant but rather is an accounting function. Therefore, the grant accountant's compensation and benefits would not be allocated to the programmatic area. However, a scientific report prepared by a principal investigator who is responsible for the research activity would be indicative of direct conduct and/or direct supervision of the grant activity, and the principal investigator's compensation and benefits would be allocated to the grant. ##### [720-958-55-176](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-176) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:22.378Z to 2026-09-10T01:13:22.378Z Record version: sha256:27584110e0feb3c8771d3a685d9981949d2960e47811516a7a6527a9c68714ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with the Cases presented in paragraphs [958-720-55-172 through 55-175](https://asc.understandingaccounting.org/asc/720/958/#720-958-55-172) , an NFP would be required to assess which activities constitute direct conduct or direct supervision of a program or support function and, therefore, would require allocation of costs. The information required to be disclosed by paragraph [958-720-50-1(d)](https://asc.understandingaccounting.org/asc/720/958/#720-958-50-1) would be the cost allocation method used to allocate costs of activities identifiable with one or more program, fundraising, or membership-development activities, an example of which is illustrated as follows. - Note X. Methods Used for Allocation of Expenses from Management and General Activities - The financial statements report certain categories of expenses that are attributable to one or more program or supporting functions of the Organization. Those expenses include depreciation and amortization, the president's office, communications department, and information technology department. Depreciation is allocated based on square footage, the president's office is allocated based on estimates of time and effort, certain costs of the communications department are allocated based on estimates of time and effort, and the information technology department is allocated based on estimates of time and costs of specific technology utilized. Source downloaded (UTC): 2026-09-10T01:13:24.216Z to 2026-09-10T01:13:24.216Z Record version: sha256:4536841695cb95252f473d36b90761c6f83def6b54fed845a44cb7ddfdc33c10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/720/958/#60-relationships) SEC content: no #### Other Expenses ##### [720-958-60-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:24.216Z to 2026-09-10T01:13:24.216Z Record version: sha256:759e3d6d7bf8a54f541ef2f3d693b55f47a8e956396d81daded6f7485201b856 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For [activities](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial.") that stimulate a desire to purchase a [not-for-profit entity's](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP's) products or use its services, see Subtopic 720-35. #### Income Taxes ##### [720-958-60-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-60-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:24.216Z to 2026-09-10T01:13:24.216Z Record version: sha256:a813af4321928cc483bbb08c59b764e03b82f063c7786b6ea04da20caeb216ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For accounting for income taxes that apply to the activities of an NFP, see Topic 740. Source downloaded (UTC): 2026-09-10T01:13:26.933Z to 2026-09-10T01:13:26.933Z Record version: sha256:74c78175491cd44e99442da5be8b5bc1366f353e8090da5825a7ddbd086f205d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/720/958/#65-transition-and-open-effective-date-information) SEC content: no ##### [720-958-65-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-65-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:26.933Z to 2026-09-10T01:13:26.933Z Record version: sha256:51c817ff6dfd54997efdb82b351149324a872cb054f93cfa10a6bbecb701295d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 01/05/2016 after the end of the transition period stated in Accounting Standards Update No. 2013-06, _Not-for-Profit Entities (Topic 958): Services Received from Personnel of an Affiliate_. Source downloaded (UTC): 2026-09-10T01:13:30.229Z to 2026-09-10T01:13:42.190Z Record version: sha256:fa283f2b1bcc632b7a74b521380330f190ff591d02a15a89c72650f246fec78d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-970: Other Expenses — Real Estate—General ### Machine-generated study aids ```json { "summary": "ASC 720-970 addresses when real estate project costs must be expensed rather than capitalized. Its core rules: internal costs of preacquisition activities for a property that will be an operating property at acquisition date are expensed as incurred (720-970-25-1), and indirect costs not clearly related to projects under development or construction — including general and administrative expenses — are charged to expense as incurred (720-970-25-3). The Subtopic defines \"operating\" property as one where major construction is substantially complete and the property is either available for occupancy upon tenant improvements or already income-producing (720-970-25-2).", "key_points": [ "All content in this Subtopic resides in the Real Estate Project Costs Subsections, which govern capitalization versus expensing of real estate project costs (720-970-05-1 and 720-970-05-2).", "Internal costs of preacquisition activities incurred to acquire a property that will be classified as operating at the acquisition date must be expensed as incurred (720-970-25-1).", "A property is 'operating' at acquisition if major construction activity (not routine maintenance or cleanup) is substantially completed and it is either held available for occupancy upon completion of tenant improvements by the acquirer or already income-producing (720-970-25-2).", "Indirect costs that do not clearly relate to projects under development or construction, including general and administrative expenses, are charged to expense as incurred (720-970-25-3).", "Guidance on accounting for internal costs relating to real estate property acquisitions (i.e., the capitalization side) is located in the Real Estate Project Costs Subsection of Section 970-340-25 (720-970-05-3).", "Scope follows the Overall Subtopic scope in Section 970-10-15, including the Real Estate Project Costs Subsection of that section (720-970-15-1 and 720-970-15-2)." ], "categories": [ "Recognition", "Inventory and PP&E", "Industry-specific", "Initial measurement" ], "audience_level": "intermediate", "student_note": "This is the \"expense it\" mirror of ASC 970-340's capitalization rules: the key fork is whether the target property is already operating (expense internal preacquisition costs) versus under development or construction (potential capitalization). Students commonly assume all preacquisition costs can be capitalized — internal costs tied to an operating property, and any indirect/G&A costs not clearly tied to a development project, never can.", "related_topics": [ "970-340", "970-10", "970-360", "805", "835-20" ], "key_concepts": [ "real estate project costs", "preacquisition costs", "internal costs", "operating property", "indirect costs", "general and administrative expenses", "capitalization versus expensing", "project under development or construction" ] } ``` Source downloaded (UTC): 2026-09-10T01:13:30.229Z to 2026-09-10T01:13:30.229Z Record version: sha256:a613452f40dbbdec39d1b1e471a09413e569912b1ee8d0955a5eecbe6641ff8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-970-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/970/#00-status) SEC content: no ##### [720-970-00-1](https://asc.understandingaccounting.org/asc/720/970/#720-970-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:30.229Z to 2026-09-10T01:13:30.229Z Record version: sha256:44e223be7eaf9cfc23adfa9fcb47d8184792c310551566159d3ec9c0515777a5 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
970-720-05-3AmendedAccounting Standards Update No. 2012-0410/01/2012
Source downloaded (UTC): 2026-09-10T01:13:33.685Z to 2026-09-10T01:13:33.685Z Record version: sha256:3fa51641b38808854f1e3edaa8c4372bb7968e31fb0501bae897feec043479e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-970-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/970/#05-overview-and-background) SEC content: no ##### [720-970-05-1](https://asc.understandingaccounting.org/asc/720/970/#720-970-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:33.685Z to 2026-09-10T01:13:33.685Z Record version: sha256:17aee5c8ec10a07d779b7ea53a6407339736aeeb77dd54bcefef2777de67da5c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The content in this Subtopic is contained in the Real Estate Project Costs Subsections. ### Real Estate Project Costs ##### [720-970-05-2](https://asc.understandingaccounting.org/asc/720/970/#720-970-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:33.685Z to 2026-09-10T01:13:33.685Z Record version: sha256:590c6f27427e45f8abe22a8bafdbb3a24a9e2c7a1d19e16e800a4b7fc3285cf8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Real Estate Project Costs Subsections of this Subtopic provide guidance on the capitalization and expensing of real estate [project costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project."). ##### [720-970-05-3](https://asc.understandingaccounting.org/asc/720/970/#720-970-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:33.685Z to 2026-09-10T01:13:33.685Z Record version: sha256:886676cf46b10ae2cac9b7d25bb5aab7098467c59ee44454aab064c0cfa65987 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See the [Real Estate Project Costs Subsection](https://asc.understandingaccounting.org/updates/page-2147482051/) of Section 970-340-25 for guidance on the accounting for internal costs relating to real estate property acquisitions. Source downloaded (UTC): 2026-09-10T01:13:35.751Z to 2026-09-10T01:13:35.751Z Record version: sha256:73dfa27a56128c6a43014439192366b8a85d4ee0edf30bc87d10b7dae5b41529 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-970-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/970/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-970-15-1](https://asc.understandingaccounting.org/asc/720/970/#720-970-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:35.751Z to 2026-09-10T01:13:35.751Z Record version: sha256:2256b9f101a83c413a23d3727de711a5ff4c2f735f4f4a011a053640f1f436db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 970-10-15. ### Real Estate Project Costs ##### [720-970-15-2](https://asc.understandingaccounting.org/asc/720/970/#720-970-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:35.751Z to 2026-09-10T01:13:35.751Z Record version: sha256:becbfbb1261e67f7caf04aea106209f6a19cbbfd703515f71c8f8102cc2a5c1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Real Estate [Project Costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project.") Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the [Real Estate Project Costs Subsection](https://asc.understandingaccounting.org/asc/970/10/#15-scope-and-scope-exceptions) of Section 970-10-15. Source downloaded (UTC): 2026-09-10T01:13:42.190Z to 2026-09-10T01:13:42.190Z Record version: sha256:ed734747b85c721ca50fbb986aa7755a7aca44cebd4fd2c3d675d2a355230c93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-970-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/970/#25-recognition) SEC content: no ### Real Estate Project Costs #### Preacquisition Costs ##### [720-970-25-1](https://asc.understandingaccounting.org/asc/720/970/#720-970-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:42.190Z to 2026-09-10T01:13:42.190Z Record version: sha256:1ad8ecf48769f6c434e1e4e9acf977d103d1395d0add07519adc94eba8768014 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Internal costs of preacquisition activities incurred in connection with the acquisition of a property that will be classified as operating at the date of acquisition shall be expensed as incurred. ##### [720-970-25-2](https://asc.understandingaccounting.org/asc/720/970/#720-970-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:42.190Z to 2026-09-10T01:13:42.190Z Record version: sha256:8de893034af6797842c4409c0d2d30347ca05d3dfef6e20a56927cf397cff3dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A property would be considered operating if, at the date of acquisition, major construction activity (as distinguished from activities such as routine maintenance and cleanup) is substantially completed on the property and either of the following conditions exists: 1. a It is held available for occupancy upon completion of tenant improvements by the acquirer. 2. b It is already income-producing. #### Indirect Costs ##### [720-970-25-3](https://asc.understandingaccounting.org/asc/720/970/#720-970-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:42.190Z to 2026-09-10T01:13:42.190Z Record version: sha256:6d2ab342716028bf0afa3040db0910c4b71f34e432c5a9b2f5569a4c8c22033a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Indirect costs that do not clearly relate to projects under development or construction, including general and administrative expenses, shall be charged to expense as incurred. Source downloaded (UTC): 2026-09-10T01:13:44.169Z to 2026-09-10T01:13:52.448Z Record version: sha256:1567c470e76197b7fc032ca8018f777cb11918fe73cfad3bf1688c384c16b6ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-972: Other Expenses — Real Estate—Common Interest Realty Associations ### Machine-generated study aids ```json { "summary": "This Subtopic tells common interest realty associations (CIRAs) — such as condominium and homeowners' associations — how to account for expenditures on major repairs or replacements of common property. Under 720-972-25-1, a CIRA that uses fund accounting charges such expenditures to the fund(s) established for major repairs and replacements; if the expenditure relates to common property that has been recognized as an asset, the amount is instead reported as a transfer to the operating fund (or property fund, if one exists).", "key_points": [ "The Subtopic addresses accounting for major repair or replacement expenditures by common interest realty associations (720-972-05-1).", "Its scope is the same as that of the Overall Subtopic, ASC 972-10-15 (720-972-15-1).", "A CIRA using fund accounting charges expenditures for major repairs or replacements to the fund or funds established for major repairs and replacements (720-972-25-1).", "If the expenditure from the major repairs and replacement fund relates to common property that is recognized as an asset, the amount expended is reported as a transfer to the operating fund — or to the property fund if such a fund has been established (720-972-25-1)." ], "categories": [ "Recognition", "Industry-specific", "Financial statement presentation" ], "audience_level": "intermediate", "student_note": "The trap is treating every replacement outlay as an expense of the replacement fund: if the underlying common property is capitalized as an asset, the outlay is a transfer between funds rather than a charge against the replacement fund. Knowing whether the CIRA recognizes common property as an asset drives the answer.", "related_topics": [ "972-10", "972-360", "972-605", "958-205" ], "key_concepts": [ "common interest realty association", "fund accounting", "major repairs and replacements fund", "common property", "interfund transfer", "operating fund", "property fund" ] } ``` Source downloaded (UTC): 2026-09-10T01:13:44.169Z to 2026-09-10T01:13:44.169Z Record version: sha256:f93140d646845c51633ff8e592d29d130030b857ff12cd316b8ef73541dce9c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-972-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/972/#05-overview-and-background) SEC content: no ##### [720-972-05-1](https://asc.understandingaccounting.org/asc/720/972/#720-972-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:44.169Z to 2026-09-10T01:13:44.169Z Record version: sha256:523b5c7ee52cdcb480e656c4ed882de88585eb73d78574b894e92c938e9e9e63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting for major repair or replacement expenditures by [common interest realty associations](https://asc.understandingaccounting.org/glossary/c/#common-interest-realty-association "An association, also known as a community association, responsible for the governance of the common interest community, for which it was established to serve. A common interest realty association is generally funded by its members via periodic assessments by the common interest realty association so that it can perform its duties, which include management services and maintenance, repair, and replacement of the common property, among other duties established in the governing documents and by state statute."). Source downloaded (UTC): 2026-09-10T01:13:46.925Z to 2026-09-10T01:13:46.925Z Record version: sha256:06f5ecacfcee7664cc617c88c2d83e0543e9dac235b1f03c1d2325fe3f479a70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-972-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/972/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-972-15-1](https://asc.understandingaccounting.org/asc/720/972/#720-972-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:46.925Z to 2026-09-10T01:13:46.925Z Record version: sha256:49a0e224bde716917974e8008a830a23a0aae7a36be9617840327dc927628c74 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 972-10-15. Source downloaded (UTC): 2026-09-10T01:13:52.448Z to 2026-09-10T01:13:52.448Z Record version: sha256:8a8a04bf342e00b4ebdadb6fd1aa536825f79c4d2e4a5f602c7517a118db40b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-972-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/972/#25-recognition) SEC content: no ##### [720-972-25-1](https://asc.understandingaccounting.org/asc/720/972/#720-972-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:52.448Z to 2026-09-10T01:13:52.448Z Record version: sha256:9ba9bc7408ff15d6ba7bcdb5758a5df3ad39c364b8a7cc512d451745b2958484 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Common interest realty associations](https://asc.understandingaccounting.org/glossary/c/#common-interest-realty-association "An association, also known as a community association, responsible for the governance of the common interest community, for which it was established to serve. A common interest realty association is generally funded by its members via periodic assessments by the common interest realty association so that it can perform its duties, which include management services and maintenance, repair, and replacement of the common property, among other duties established in the governing documents and by state statute.") that use fund accounting shall charge expenditures for major repairs or replacements to the fund or funds established for major repairs or replacements. If an expenditure from the major repairs and replacement fund relates to [common property](https://asc.understandingaccounting.org/glossary/c/#common-property "A common interest realty association's real or personal property to which title or other evidence of ownership is held by either: Individual members in common The common interest realty association directly.") recognized as an asset, the amount expended shall be reported as a transfer to the operating fund (or property fund, if such a fund is established). Source downloaded (UTC): 2026-09-10T01:13:54.098Z to 2026-09-10T01:14:12.248Z Record version: sha256:30e482915a757325fa3c411978668ba0b246dda0ae66f9dbc1947d490286c9e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974: Other Expenses — Real Estate—Real Estate Investment Trusts ### Machine-generated study aids ```json { "summary": "This subtopic governs how a real estate investment trust (REIT) accounts for \"operating support\" received from its external adviser — arrangements designed to guarantee the REIT a certain return, such as buying loans or property above fair value, debt forgiveness, advisory fee reductions, compensating balances, or cash payments. The REIT must adjust any transferred assets or liabilities to fair value at the transaction date and recognize the support effectively obtained as income or as a reduction of advisory fees. The effect of these transactions must be reported separately in the income statement and fully disclosed as a related party relationship.", "key_points": [ "Adviser support methods that can produce a guaranteed return to the REIT include purchasing a loan or property above fair value, forgiving indebtedness, reducing advisory fees, providing compensating balances, and outright cash payments (720-974-25-1).", "Accounting for operating support requires adjusting assets or liabilities transferred between the REIT and its adviser to fair value as of the transaction date (720-974-25-2(a)).", "Alternatively (or additionally), the operating support effectively obtained is recognized as income or as a reduction of advisory fees (720-974-25-2(b)).", "The effect of operating support transactions must be reported separately in the income statement (720-974-45-1).", "A REIT receiving operating support must make full disclosure of the relationship between the parties and the nature and amount of the transactions (720-974-50-1).", "Scope follows the Overall REIT Subtopic, Section 974-10-15 (720-974-15-1)." ], "categories": [ "Recognition", "Presentation", "Disclosure", "Industry-specific" ], "audience_level": "intermediate", "student_note": "The point is substance over form: an adviser cannot dress up a subsidy as an ordinary purchase or fee arrangement — the excess over fair value is income (or a fee reduction) that must be shown separately, not buried in operating results. A common misunderstanding is treating an above-fair-value asset purchase by the adviser as a normal sale rather than recognizing support income and writing the transferred asset to fair value.", "related_topics": [ "974-10", "974-720", "850", "820", "946" ], "key_concepts": [ "real estate investment trust", "operating support from adviser", "advisory fees", "fair value adjustment on transfer", "related party transactions", "separate income statement presentation", "debt forgiveness", "compensating balances" ] } ``` Source downloaded (UTC): 2026-09-10T01:13:54.098Z to 2026-09-10T01:13:54.098Z Record version: sha256:84f7955154de8539ff5883ccb0f5dfa2fe07d32b366b96bf26c41f34ac870ab0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/974/#00-status) SEC content: no ##### [720-974-00-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:54.098Z to 2026-09-10T01:13:54.098Z Record version: sha256:8f839de8cb2b7e5a59455b047781c858563a9939743c0408653399617f89d68f 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
Real Estate Investment TrustAddedAccounting Standards Update No. 2014-0905/28/2014
974-720-05-1AddedAccounting Standards Update No. 2014-0905/28/2014
974-720-15-1AddedAccounting Standards Update No. 2014-0905/28/2014
974-720-25-1AddedAccounting Standards Update No. 2014-0905/28/2014
974-720-25-2AddedAccounting Standards Update No. 2014-0905/28/2014
974-720-45-1AddedAccounting Standards Update No. 2014-0905/28/2014
974-720-50-1AddedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:13:56.431Z to 2026-09-10T01:13:56.431Z Record version: sha256:b7a53a0cd91dde433125554fb878b14f940cfee174d49b539cee70fbeb7c3091 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/974/#05-overview-and-background) SEC content: no ##### [720-974-05-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:56.431Z to 2026-09-10T01:13:56.431Z Record version: sha256:1c6d7b01b8053ff272a54063a5191388d2db7ec59ddfd95745e24efc3874fee7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses recognition, disclosure, and other presentation matters for [real estate investment trusts](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income)."). Source downloaded (UTC): 2026-09-10T01:13:58.077Z to 2026-09-10T01:13:58.077Z Record version: sha256:47f8942f852bced0ea72a221e52e9329e89276343f7c02d1074ba69d6ae5782a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/974/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-974-15-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:58.077Z to 2026-09-10T01:13:58.077Z Record version: sha256:1c8c62ab5e03cc1a0efb6f2270686ea72d8c50c67fdc18fec80002a38a53230b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 974-10-15. Source downloaded (UTC): 2026-09-10T01:14:03.031Z to 2026-09-10T01:14:03.031Z Record version: sha256:8ac1cc4bb6da0efd3b0251934fed1875bf4b7b9961467132c3345cda1511975a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/974/#25-recognition) SEC content: no #### Operating Support of the Real Estate Investment Trust by the Adviser ##### [720-974-25-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:03.031Z to 2026-09-10T01:14:03.031Z Record version: sha256:a86bd06f92b34d69b9dd4b53a1981c898ef4e440279a12b03e92c85f3ace2006 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Various methods are employed by advisers to ensure a certain return to the [real estate investment trust](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income).") for certain periods. Some of these methods are: 1. a Purchasing a loan or a property at an amount in excess of fair value 2. b Forgiving indebtedness 3. c Reducing advisory fees 4. d Providing required compensating balances 5. e Making outright cash payments. ##### [720-974-25-2](https://asc.understandingaccounting.org/asc/720/974/#720-974-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:03.031Z to 2026-09-10T01:14:03.031Z Record version: sha256:b50f126a56bfb58776d5eeef32c5638283691be56e93a7b6954236e9b5455ee3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting by a real estate investment trust for operating support from its adviser would include either of the following: 1. a Adjustment of any assets (or liabilities) which will be transferred between the entities to fair value as of the date of the transaction 2. b Recognition, as income or as a reduction of advisory fees, of the operating support effectively obtained. Source downloaded (UTC): 2026-09-10T01:14:05.868Z to 2026-09-10T01:14:05.868Z Record version: sha256:de66f6a0507eafb8972d85d72f3919fabf8f67eee7db1a1c9af7579c774c9a21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/974/#45-other-presentation-matters) SEC content: no #### Operating Support of the Real Estate Investment Trust by the Adviser ##### [720-974-45-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:05.868Z to 2026-09-10T01:14:05.868Z Record version: sha256:673ca05d19ceba0fc3b21d8414433a3b94d32ef8c90f892da645b4d530f36a43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of the operating support transactions described in paragraphs [974-720-25-2](https://asc.understandingaccounting.org/asc/720/974/#720-974-25-2) and [974-720-50-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-50-1) shall be reported separately in the income statement. Source downloaded (UTC): 2026-09-10T01:14:08.726Z to 2026-09-10T01:14:08.726Z Record version: sha256:1b19e524c3e759e8a9ec5ef8879e36a817107ff3bfd4b74205cc534f78e640ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-974-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/974/#50-disclosure) SEC content: no #### Operating Support of the Real Estate Investment Trust by the Adviser ##### [720-974-50-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:08.726Z to 2026-09-10T01:14:08.726Z Record version: sha256:3884f98323011b09ee5ba16904ddc5a738982a53ec2903caa0b004a102959558 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [real estate investment trust](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income).") with operating support from its adviser shall make full disclosure of the relationship between the parties and the nature and amount of the transactions. Source downloaded (UTC): 2026-09-10T01:14:14.996Z to 2026-09-10T01:14:26.123Z Record version: sha256:10722cb4af9e62297d64fd6e1a87205f82d2b60f06ebe2ef76e0cd35767d407d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-978: Other Expenses — Real Estate—Time-Sharing Activities ### Machine-generated study aids ```json { "summary": "This subtopic governs how a time-share seller accounts for other expenses of time-sharing activities — chiefly selling and marketing costs and subsidies of the owners association. The core rule is that all costs incurred to sell time-sharing intervals are expensed as incurred unless they qualify for capitalization as costs to obtain a contract under ASC 340-40-25-1 through 25-4, and seller payments of dues, maintenance fees, or subsidies of owners association losses are likewise expensed as incurred.", "key_points": [ "All costs incurred to sell time-sharing intervals are charged to expense as incurred unless they specifically qualify for capitalization under paragraphs 340-40-25-1 through 25-4 (720-978-25-1).", "Costs that must be expensed include costs to induce potential buyers to take sales tours (e.g., telemarketing call centers), all costs of unsuccessful sales transactions, and all sales overhead such as on-site and off-site sales office rent, utilities, maintenance, and telephone (720-978-25-2).", "Advertising costs are accounted for under Subtopic 720-35; direct incremental costs of tour fulfillment, such as airline tickets to bring customers to a tour location, are expensed at the time the tour takes place (720-978-25-2).", "Seller payments of dues or maintenance fees on unsold intervals are expensed as incurred, except when accounted for as incidental operations during holding periods under 978-330-35-3 through 35-6 (720-978-25-3).", "Seller payments of additional amounts to subsidize owners association losses are charged to expense as incurred (720-978-25-3).", "If the seller is contractually entitled to recover all or part of its subsidy from the owners association, a receivable is recorded only if recovery is probable and measurable with reasonable reliability (720-978-25-3).", "A time-share seller typically forms the owners association, appoints its board during sellout, and often has an affiliate manage the project (720-978-05-3)." ], "categories": [ "Recognition", "Industry-specific", "Revenue", "Inventory and PP&E" ], "audience_level": "intermediate", "student_note": "Exam traps here are the presumption of expensing: students often assume heavy selling and marketing outlays in time-share projects can be capitalized as project costs, when only incremental costs meeting ASC 340-40-25-1 through 25-4 qualify, and tour-generation, failed-sale, and sales overhead costs never do. Also remember a subsidy receivable from the owners association requires recovery to be both probable and measurable with reasonable reliability.", "related_topics": [ "340-40", "978-10", "978-330", "720-35", "606", "970" ], "key_concepts": [ "time-sharing intervals", "selling and marketing costs", "costs to obtain a contract", "owners association", "seller subsidy", "tour fulfillment costs", "maintenance fees and dues", "recoverability of subsidy" ] } ``` Source downloaded (UTC): 2026-09-10T01:14:14.996Z to 2026-09-10T01:14:14.996Z Record version: sha256:a62fc160f7d307b5a42e0ef0eceba4a8bcbfae609102c1b1b91b82253fd0ff6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-978-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/978/#00-status) SEC content: no ##### [720-978-00-1](https://asc.understandingaccounting.org/asc/720/978/#720-978-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:14.996Z to 2026-09-10T01:14:14.996Z Record version: sha256:b1c34a141a181642da5abf87fb0c5bfb6e1c4cd92d6c6c3bc3bd70d1c540ef0a 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
Time-SharingAmendedAccounting Standards Update No. 2014-0603/14/2014
Undivided Interest (2nd def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
978-720-25-1 through 25-3
AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:14:18.950Z to 2026-09-10T01:14:18.950Z Record version: sha256:1b0df735dfba280b228eaa92e862ebd528cb438857c600d8e8383f2e4b87008b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-978-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/978/#05-overview-and-background) SEC content: no ##### [720-978-05-1](https://asc.understandingaccounting.org/asc/720/978/#720-978-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:18.950Z to 2026-09-10T01:14:18.950Z Record version: sha256:64181cb192d4b18a544840928a35d176e99b0df835a5969b55b9527e6033aa3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses real estate [time-sharing](https://asc.understandingaccounting.org/glossary/t/#time-sharing "An arrangement in which a seller sells or conveys the right to occupy a dwelling unit for specified periods in the future. Forms of time-sharing arrangements include but are not limited to fixed and floating time, interval ownership, undivided interests, points programs, vacation clubs, right-to-use arrangements such as tenancy-for-years arrangements, and arrangements involving special-purpose entities. In this context, an undivided interest is a time-sharing arrangement that involves a tenant-in-common interest in a condominium unit or entire improved property, and in which the interest holder is assigned a specific period (generally, a specific week). The interest holder is also assigned a specific unit if the undivided interest is in the entire improved property.") recognition issues for other expenses. Other expenses may include selling costs, [seller subsidies](https://asc.understandingaccounting.org/glossary/s/#seller-subsidy "As related to time-sharing transactions, an amount that a seller pays to an owners association to cover net losses that may be incurred by the association."), and [owners association](https://asc.understandingaccounting.org/glossary/o/#owners-association "A body of owners formed to administer the rules and regulations of a time-sharing project. Also denoted homeowners association, interval owners association, property owners association, or vacation owners association.") costs. ##### [720-978-05-2](https://asc.understandingaccounting.org/asc/720/978/#720-978-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:18.950Z to 2026-09-10T01:14:18.950Z Record version: sha256:d0d3ec12fea4af6977532b69b1cd2349130631cf0fd1c72cdb36fd0a7d98a2f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Time-share](https://asc.understandingaccounting.org/glossary/t/#time-share "See Interval.") projects typically incur significant operating costs, such as costs of property taxes, repairs and maintenance, and reservation systems. Time-share owners are responsible for paying for the costs of owning their intervals. Because there are many time-share owners for a given [project](https://asc.understandingaccounting.org/glossary/p/#project "A time-sharing development; some projects may be completed in a single phase, such as a single, one-story building containing several time-sharing units. Other projects may be completed in several phases, for example: A hotel that is being converted to time-sharing units one floor at a time while the unconverted units continue to be rented A number of buildings, each containing several time-sharing units, being built on a piece of property over an extended period of time."), a centralized mechanism generally is used to collect each owner's share of those costs of ownership and to pay for operating costs. ##### [720-978-05-3](https://asc.understandingaccounting.org/asc/720/978/#720-978-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:18.950Z to 2026-09-10T01:14:18.950Z Record version: sha256:9d6579a585d5c951f79357149360b6723b7a6bb775829d13565e9233c8ee5fec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A time-share seller typically forms an owners association to manage the day-to-day operations of a project. Time-share owners pay assessments to the owners association. The activities of an owners association are governed by its bylaws and by a board of directors. Typically, an owners association will hire a manager to handle the day-to-day operations. Often, an affiliate of the original time-share seller is hired by an owners association to manage a project. Because the time-share seller owns a majority of units at the beginning of the sellout of a project, it typically will appoint members of the owners association's board of directors. ##### [720-978-05-4](https://asc.understandingaccounting.org/asc/720/978/#720-978-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:18.950Z to 2026-09-10T01:14:18.950Z Record version: sha256:c5d3a56ac3ad87d48e3cccfc6d145184881c382c943e9371b7d28b79a1d2588a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Selling and marketing costs are significant in relation to sales revenue, and sales incentives and inducements are common. Source downloaded (UTC): 2026-09-10T01:14:22.587Z to 2026-09-10T01:14:22.587Z Record version: sha256:78a19cf0dd11f2cd5369123ccf17f86eaaadf9a236d414504bd1a7207f1a20b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-978-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/978/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-978-15-1](https://asc.understandingaccounting.org/asc/720/978/#720-978-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:22.587Z to 2026-09-10T01:14:22.587Z Record version: sha256:0fd004b2ac3cc2b926756982f31dec7df90961bd03785154cb49ab3a5534c26a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 978-10-15. Source downloaded (UTC): 2026-09-10T01:14:26.123Z to 2026-09-10T01:14:26.123Z Record version: sha256:55d80b26ab9ed91597c0de755d3a0c39ea017ac3bae86c0f1a5ed4e096e98ac0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-978-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/978/#25-recognition) SEC content: no #### Selling Costs ##### [720-978-25-1](https://asc.understandingaccounting.org/asc/720/978/#720-978-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:26.123Z to 2026-09-10T01:14:26.123Z Record version: sha256:1176aaecec34252103bbbcd04f3663dc2d9c93a99b6712a25519a960a1c01c9f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All costs incurred to sell [time-sharing](https://asc.understandingaccounting.org/glossary/t/#time-sharing "An arrangement in which a seller sells or conveys the right to occupy a dwelling unit for specified periods in the future. Forms of time-sharing arrangements include but are not limited to fixed and floating time, interval ownership, undivided interests, points programs, vacation clubs, right-to-use arrangements such as tenancy-for-years arrangements, and arrangements involving special-purpose entities. In this context, an undivided interest is a time-sharing arrangement that involves a tenant-in-common interest in a condominium unit or entire improved property, and in which the interest holder is assigned a specific period (generally, a specific week). The interest holder is also assigned a specific unit if the undivided interest is in the entire improved property.") intervals shall be charged to expense as incurred unless they specifically qualify for capitalization under paragraphs [340-40-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) . ##### [720-978-25-2](https://asc.understandingaccounting.org/asc/720/978/#720-978-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:26.123Z to 2026-09-10T01:14:26.123Z Record version: sha256:b28f7195f7646a13fe4875733d163c582ca02f08bbb3d34a359f25ac689a59ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of costs that do not meet the requirements in paragraphs [340-40-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) for capitalization, and that shall therefore be charged to expense as incurred, include all costs incurred to induce potential buyers to take sales tours (for example, the costs of telemarketing call centers); all costs incurred for unsuccessful sales transactions; and all sales overhead such as on-site and off-site sales office rent, utilities, maintenance, and telephone expenses. Advertising costs shall be accounted for in accordance with Subtopic 720-35. Direct incremental costs of tour fulfillment, such as costs of airline tickets to bring customers to a tour location, shall be charged to expense at the time the tour takes place. #### Seller Subsidies ##### [720-978-25-3](https://asc.understandingaccounting.org/asc/720/978/#720-978-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:26.123Z to 2026-09-10T01:14:26.123Z Record version: sha256:4fecca32af64fc10056e46164b2fdb42cbb4a71cefce76050bf756c4c7c940ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During early stages of [project](https://asc.understandingaccounting.org/glossary/p/#project "A time-sharing development; some projects may be completed in a single phase, such as a single, one-story building containing several time-sharing units. Other projects may be completed in several phases, for example: A hotel that is being converted to time-sharing units one floor at a time while the unconverted units continue to be rented A number of buildings, each containing several time-sharing units, being built on a piece of property over an extended period of time.") sellout, there are typically not enough dues-paying time-sharing [interval](https://asc.understandingaccounting.org/glossary/i/#interval "The specific period (generally, a specific week) during the year that a time-sharing unit is specified by agreement to be available for occupancy by a particular customer. Also denoted Time-Sharing Interest or Time-Share.") owners to support the financial obligations of the [owners association](https://asc.understandingaccounting.org/glossary/o/#owners-association "A body of owners formed to administer the rules and regulations of a time-sharing project. Also denoted homeowners association, interval owners association, property owners association, or vacation owners association."). Often a [time-share](https://asc.understandingaccounting.org/glossary/t/#time-share "See Interval.") seller, for a limited period of time, subsidizes the operations of the owners association rather than paying the dues or maintenance fees on the time-sharing intervals that it owns (that is, the unsold intervals in the project). Subsequent to that period, the time-share seller pays dues or maintenance fees on the time-sharing intervals that it owns. Payments by the seller of dues or maintenance fees, except when accounted for as [incidental operations](https://asc.understandingaccounting.org/glossary/i/#incidental-operations "Revenue-producing activities engaged in during the holding or development period to reduce the cost of developing the property for its intended use, as distinguished from activities designed to generate a profit or a return from the use of the property.") during holding periods under paragraphs [978-330-35-3 through 35-6](https://asc.understandingaccounting.org/asc/330/978/#330-978-35-3) , shall be charged to expense as incurred. Payments by the seller of additional amounts to subsidize losses shall be charged to expense as incurred. If a seller is contractually entitled to recover from the owners association all or a portion of its subsidy, the seller shall record a receivable only if recovery is probable and measurable with reasonable reliability.