# ASC 835-912-25: Interest — Contractors—Federal Government — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/835/912/#25-recognition) 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): 2026-09-10T01:50:30.147Z to 2026-09-10T01:50:30.147Z Record version: sha256:0606f41800585da420d7daa91a2cfaa2cc768b92612a0106b1fc67f04ee5d5b5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-912-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/835/912/#25-recognition) SEC content: no #### Capitalization of Interest Cost on Federal Government Contracts ##### [835-912-25-1](https://asc.understandingaccounting.org/asc/835/912/#835-912-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:30.147Z to 2026-09-10T01:50:30.147Z Record version: sha256:9303c4f306d1139261e8076a64ce492304f39425869962093ea1ef3d9b3b155c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some government [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") may appear to qualify for capitalization of interest costs (see Subtopic 835-20). However, paragraph [835-20-15-6](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-6) proscribes interest capitalization for assets employed in the earnings activities of an entity. Because many contractors recognize [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.") over time in accordance with the guidance on the transfer of control in paragraphs [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) , measuring progress toward complete satisfaction of a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in accordance with paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) 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](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.") 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 [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) . ##### [835-912-25-2](https://asc.understandingaccounting.org/asc/835/912/#835-912-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:30.147Z to 2026-09-10T01:50:30.147Z Record version: sha256:8d9d31dd18e61b2fd60ff7f6c8b379966bc6969eba9f50feab2e0cdf827e2e30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/606/10/#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. ##### [835-912-25-3](https://asc.understandingaccounting.org/asc/835/912/#835-912-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:30.147Z to 2026-09-10T01:50:30.147Z Record version: sha256:0018e412b7c3a6f9373766ae0075eda55d0f0dee3b6e328d7f7dc5280b94523b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/606/10/#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.