# ASC 730-912-15: Research and Development — Contractors—Federal Government — 15 Scope and Scope Exceptions

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/730/912/#15-scope-and-scope-exceptions)

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## ASC 730-912-15: 15 Scope and Scope Exceptions

[Read section](https://asc.understandingaccounting.org/asc/730/912/#15-scope-and-scope-exceptions)

SEC content: no

#### Overall Guidance

##### [730-912-15-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-1)

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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 912-10-15, with specific instrument qualifications noted below.

#### Instruments

##### [730-912-15-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-2)

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This Subtopic applies only to contractual arrangements meeting all of the following conditions:

1.  a
    
    The activities performed in connection with the contractual arrangement qualify as research and development (see Subtopic 730-10).
    
2.  b
    
    The contractor retains a right to the data and results of the research and development activities.
    
3.  c
    
    The contractual arrangement obligates the contractor to perform only on a best-efforts basis to achieve the agreed-on objectives of the research and development activity, rather than to deliver a product or service meeting defined performance or other (such as design) specifications.
    
4.  d
    
    At the inception of the contract, the contractor and the customer enter into the arrangement with the expectation that costs will be incurred in excess of amounts to be funded. This condition will be met if contractual or other documentation specifically evidences acknowledgment of this expectation by both the contractor and the customer. Implicit in this condition is the existence of significant uncertainty at the date the contractor enters into the arrangement regarding the likelihood of successfully securing follow-on contracts related to the research and development activity.
    
5.  e
    
    The research and development arrangement is not combined with other contracts in accordance with the guidance on combining contracts in paragraph [606-10-25-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-9).
    
6.  f
    
    The federal government is the sole or principal expected ultimate customer (including foreign military sales) for the research and development activity or products directly resulting from the research and development activity subject to the arrangements.

##### [730-912-15-3](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-3)

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Contractual arrangements meeting all of the conditions in the preceding paragraph differ 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.") addressed in 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 with customers. Such activities are research and development as discussed in paragraph [730-10-15-4(c)](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-4).