{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/835/912/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"835","topic_title":"Interest","subtopic":"835-912","subtopic_title":"Contractors—Federal Government","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":"Capitalization of Interest Cost on Federal Government Contracts","paragraphs":[{"citation":"835-912-25-1","para":"25-1","html":" Some government contracts may appear to qualify for capitalization of interest costs (see Subtopic 835-20). However, paragraph 835-20-15-6 proscribes interest capitalization for assets employed in the earnings activities of an entity. Because many contractors recognize revenue over time in accordance with the guidance on the transfer of control in paragraphs , measuring progress toward complete satisfaction of a performance obligation in accordance with paragraphs as the related asset is being constructed, the asset is considered to be employed in the earnings activities of the contractor. Further, many contracts with customers require the manufacture of inventories that are routinely manufactured or otherwise produced in large quantities on a repetitive basis, for which interest capitalization is considered to be inappropriate. Accordingly, government contractors shall exclude capitalized interest from long-term contracts with customers that are performed over time in accordance with the guidance on the transfer of control in paragraphs . When revenue is recognized at a point in time in accordance with the guidance on the transfer of control in paragraph 606-10-25-30, costs may be recognized as an asset in accordance with the guidance on costs to fulfill a contract in Subtopic 340-40. If costs are recognized as an asset accordingly, such costs incurred on a discrete project are qualifying assets when activities are underway to bring the asset to the condition and location necessary for its intended use. If a contractor recognizes revenue at a point in time in accordance with the guidance on the transfer of control in paragraph 606-10-25-30 and bills all costs currently, its investment in the asset shall be limited to uncollected receivables. Such uncollected amounts shall be reduced by related non-interest-bearing liabilities, such as accounts and wages payable and accrued payroll taxes. Significant fluctuations in both outstanding receivables and accrued costs may require accumulation for each contract on a daily basis to reasonably determine the amount of such costs qualifying for interest capitalization.