# ASC 730-912: Research and Development — Contractors—Federal Government Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/730/912/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:15:43.389Z to 2026-09-10T01:16:04.136Z Record version: sha256:6cdf6d19f2766ba74de02956107dbafda5d31962c5f3a32df9cf949dfc37154a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912: Research and Development — Contractors—Federal Government ### Machine-generated study aids ```json { "summary": "This subtopic tells government contractors how to account for best-efforts-basis, research-and-development-cost-sharing arrangements with the federal government. When all six scope conditions in 730-912-15-2 are met (qualifying R&D, contractor retains rights to data/results, best-efforts-only obligation, mutual expectation that costs will exceed funding, no contract combination under 606-10-25-9, and the federal government as sole or principal ultimate customer), the arrangement is not a revenue contract under Topic 606. Instead, costs are expensed as R&D as incurred under Topic 730, and customer funding is recorded as an offset to aggregate R&D expense rather than as contract revenue (730-912-25-1).", "key_points": [ "The Subtopic applies only if all conditions of 730-912-15-2 are met, including that the activities qualify as research and development under Subtopic 730-10 and the contractor retains a right to the data and results.", "The contract must obligate the contractor to perform only on a best-efforts basis toward agreed-on objectives, not to deliver a product or service meeting defined performance or design specifications (730-912-15-2(c)).", "At contract inception both parties must expect costs to exceed amounts funded, evidenced by contractual or other documentation, implying significant uncertainty about securing follow-on contracts (730-912-15-2(d)).", "The arrangement must not be combined with other contracts under paragraph 606-10-25-9, and the federal government (including foreign military sales) must be the sole or principal expected ultimate customer (730-912-15-2(e)-(f)).", "Arrangements in scope differ from contracts with customers under Topic 606 and are research and development as described in paragraph 730-10-15-4(c) (730-912-15-3).", "Costs are recognized as research and development expense as incurred in conformity with Topic 730, and amounts funded by the customer are recognized as an offset to aggregate R&D expense rather than as contract revenues (730-912-25-1).", "Example 1 (730-912-55-1 through 55-3) illustrates the offset accounting where estimated aggregate costs are $150, anticipated customer reimbursement is $100, 50% of costs have been incurred, and the customer has paid 30% of its pro rata funding." ], "categories": [ "Recognition", "Revenue", "Industry-specific", "Presentation" ], "audience_level": "intermediate", "student_note": "The exam trap is treating customer funding as revenue: under this Subtopic the reimbursement is netted against R&D expense, not presented as contract revenue, because the arrangement is cost sharing rather than a Topic 606 contract with a customer. Watch the six scope conditions closely—failing even one (e.g., defined performance specifications, or a non-federal ultimate customer) pushes the arrangement back into Topic 606.", "related_topics": [ "730-10", "606-10", "912-10", "912-20", "912-235" ], "key_concepts": [ "best-efforts basis arrangement", "research and development cost sharing", "government contractor", "offset to research and development expense", "rights to data and results", "expectation of costs in excess of funding", "follow-on contract uncertainty", "combining contracts" ] } ``` Source downloaded (UTC): 2026-09-10T01:15:43.389Z to 2026-09-10T01:15:43.389Z Record version: sha256:15728f05b7cabe86e58f9298d438b9bf171bad6a0fb8f93da876023d64081fde Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/730/912/#00-status) SEC content: no ##### [730-912-00-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:43.389Z to 2026-09-10T01:15:43.389Z Record version: sha256:b67e7e2199931df3f25c92adce3b62e6901b20d7f6e68115a4d80caf103ca3ca 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
ContractsAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
912-730-15-2AmendedAccounting Standards Update No. 2014-0905/28/2014
912-730-15-3AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:15:47.207Z to 2026-09-10T01:15:47.207Z Record version: sha256:24697d3d61ef8a12401aa772590ce218824d7695bb3e6dd33c4c823e76986c22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/730/912/#05-overview-and-background) SEC content: no ##### [730-912-05-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:47.207Z to 2026-09-10T01:15:47.207Z Record version: sha256:bb6d3521211e254e78b5ebc105253b5dca713ea94209aab208b91ffb113e9a6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to government contractors related to identifying research and development activities included in government contracts and the accounting for such activities. #### Best-Efforts-Basis, Research-and-Development-Cost-Sharing Arrangements ##### [730-912-05-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:47.207Z to 2026-09-10T01:15:47.207Z Record version: sha256:8d311380132fa6ecfbc7c5b377e72fa2965206112aef830b28ac9b23eb7960df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contractors may enter into contractual arrangements in which the customer agrees to share the estimated costs of certain research and development activities, for example, the development of a prototype for new or advanced weapons systems. In arrangements to perform on a best-efforts basis, the contractor benefits from both lower net research and development costs and the retention of rights to the research and development results. The knowledge gained from such research and development activities may be used by the contractor in future production activities, including follow-on contracts for full-scale production of products based on the prototypes or models developed during the research and development phase. At the same time, the customer benefits from the arrangement by receiving a nonexclusive right to the results of the research and development effort. Consequently, the customer is able to encourage the contractor to focus its research and development efforts on activities important to the customer's long-range, strategic objectives in areas such as national defense. Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:b481fa568af1c7dec9707d678665abd568ae39ea9e0116a1334149234f79c1b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## 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) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:940165b2722c151526bb4a06a176c3d9be036ea53a8758eff1f26e25ec87d618 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 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) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:7e1e5f6f83223b71931d3edde08034972fd41e1ebd4e25fa61580c3d21112aca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:1195acbb01832a9b5e3230d98f55b087b2bda48f60281ab1e10f19ed59b0bf8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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). Source downloaded (UTC): 2026-09-10T01:15:58.968Z to 2026-09-10T01:15:58.968Z Record version: sha256:47704697080324f22af4ba6950526444ca328a2bfda1ecce8099d17d1b70de1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/730/912/#25-recognition) SEC content: no #### Best-Efforts-Basis, Research-and-Development-Cost-Sharing Arrangements ##### [730-912-25-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:58.968Z to 2026-09-10T01:15:58.968Z Record version: sha256:8a5552693ac3310c111b2359ddea057d23e6e7606a9f161276ff24ec340cb66d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Best-efforts-basis, research-and-development-cost-sharing arrangements within the scope of this Subtopic (see paragraph [912-730-15-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-2)) shall be recognized as research and development expense as incurred in conformity with Topic 730. Because of the cost-sharing nature of these fixed-price, best-efforts-basis, research-and-development-cost-sharing arrangements, the amounts funded by the customer shall be recognized as an offset to the contractor's aggregate research and development expense rather than as contract revenues. Example 1 (see paragraphs [912-730-55-1 through 55-3](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-1) ) illustrates the application of this guidance. Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:185c73d7107fc8a6f4a5e950ae7b9b4a3557d7677c8847341a8dc5507257140b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/730/912/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [730-912-55-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:1ac03872a47c356fca9efb7e32ae2f18100d8d949b8590f89e2644abf971054b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the guidance in paragraph [912-730-25-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-25-1) to research and development costs under a best-efforts-basis, research-and-development-cost-sharing arrangement. ##### [730-912-55-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:72f909141e0d77c56eef6367fa138db4f4af8c0e49d39a93f7806b8055156a2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example has the following assumptions: 1. a Estimated aggregate cost to be incurred by contractor in the specified research and development activity: $150 2. b Anticipated reimbursement from customer: $100 3. c As of the current reporting date 50 percent of the estimated aggregate costs have been incurred 4. d Customer has paid 30 percent of its pro rata funding. ##### [730-912-55-3](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:8ce7de1d87fbc3108deb1ee2578fd389f0a97d705cdf48142a45d19e1d8ca88a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates how to record expenditures for research and development in connection with the XYZ project. - ![](https://asc.understandingaccounting.org/asc-img/GUID-C00319E4-E29A-4E9C-8193-CEBC513CBB06-low.gif) Accounting Entries Research and Development Expense $75 Cash $75 To record expenditures for research and development in connection with the XYZ project. Receivable 35 Cash 15 Research and Development Expense 50 To record amounts receivable and collections of receivables from customer in connection with the XYZ project.