{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/835/912/","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.","number":"835-912","topic":"835","title":"Contractors—Federal Government","area":"Broad Transactions","paragraphs":6,"summary":"This Subtopic tells federal government contractors when interest cost may (and may not) be capitalized. Because assets built under contracts where revenue is recognized over time are \"employed in the earnings activities\" of the contractor (and often involve routinely produced inventories), interest capitalization is prohibited for those long-term contracts. Only when revenue is recognized at a point in time and fulfillment costs are capitalized as an asset under Subtopic 340-40 can those costs be qualifying assets for interest capitalization, and then the investment is limited to uncollected receivables net of related non-interest-bearing liabilities.","concepts":["capitalization of interest","qualifying asset","government contracts","revenue recognized over time","point-in-time revenue recognition","costs to fulfill a contract","assets employed in earnings activities","uncollected receivables"],"categories":["Initial measurement","Recognition","Industry-specific","Revenue"],"level":"intermediate","topic_title":"Interest","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"835-912-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
Contract Added Accounting Standards Update No. 2014-09 05/28/2014
Customer Added Accounting Standards Update No. 2014-09 05/28/2014
Revenue Added Accounting Standards Update No. 2014-09 05/28/2014
912-835-25-1 through 25-3
 Amended Accounting Standards Update No. 2014-09 05/28/2014
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This Subtopic provides guidance to government contractors related to capitalization of interest.
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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 912-10-15.
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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
606-10-25-27 through 25-29
, measuring progress toward complete satisfaction of a performance obligation in accordance with paragraphs
606-10-25-31 through 25-37
 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
606-10-25-27 through 25-29
.
","snippet":"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…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9303c4f306d1139261e8076a64ce492304f39425869962093ea1ef3d9b3b155c","downloaded_from":"2026-09-10T01:50:30.147Z","last_downloaded_at":"2026-09-10T01:50:30.147Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477671","source_sha256":"ec7383b2c1a9231e62968d9edba5d6a0f758cad4b15b7caecb1122d186d72b46"}},{"citation":"835-912-25-2","para":"25-2","html":"
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.
","snippet":"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 …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8d9d31dd18e61b2fd60ff7f6c8b379966bc6969eba9f50feab2e0cdf827e2e30","downloaded_from":"2026-09-10T01:50:30.147Z","last_downloaded_at":"2026-09-10T01:50:30.147Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477671","source_sha256":"ec7383b2c1a9231e62968d9edba5d6a0f758cad4b15b7caecb1122d186d72b46"}},{"citation":"835-912-25-3","para":"25-3","html":"
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.
","snippet":"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 un…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0018e412b7c3a6f9373766ae0075eda55d0f0dee3b6e328d7f7dc5280b94523b","downloaded_from":"2026-09-10T01:50:30.147Z","last_downloaded_at":"2026-09-10T01:50:30.147Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477671","source_sha256":"ec7383b2c1a9231e62968d9edba5d6a0f758cad4b15b7caecb1122d186d72b46"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:13ddd523c78770b8763e9817db3dc895949a6899278e288b67cf6ff0741d1912","downloaded_from":"2026-09-10T01:50:30.147Z","last_downloaded_at":"2026-09-10T01:50:30.147Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477671","source_sha256":"ec7383b2c1a9231e62968d9edba5d6a0f758cad4b15b7caecb1122d186d72b46"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0606f41800585da420d7daa91a2cfaa2cc768b92612a0106b1fc67f04ee5d5b5","downloaded_from":"2026-09-10T01:50:30.147Z","last_downloaded_at":"2026-09-10T01:50:30.147Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477671","source_sha256":"ec7383b2c1a9231e62968d9edba5d6a0f758cad4b15b7caecb1122d186d72b46"}}],"enrichment":{"summary":"This Subtopic tells federal government contractors when interest cost may (and may not) be capitalized. Because assets built under contracts where revenue is recognized over time are \"employed in the earnings activities\" of the contractor (and often involve routinely produced inventories), interest capitalization is prohibited for those long-term contracts. Only when revenue is recognized at a point in time and fulfillment costs are capitalized as an asset under Subtopic 340-40 can those costs be qualifying assets for interest capitalization, and then the investment is limited to uncollected receivables net of related non-interest-bearing liabilities.","key_points":["Government contractors shall exclude capitalized interest from long-term contracts with customers performed over time under the transfer-of-control guidance in 606-10-25-27 through 25-29 (835-912-25-1).","Paragraph 835-20-15-6 proscribes interest capitalization for assets employed in the earnings activities of an entity, and an asset being constructed while progress is measured under 606-10-25-31 through 25-37 is so employed (835-912-25-1).","Interest capitalization is also inappropriate for inventories that are routinely manufactured or otherwise produced in large quantities on a repetitive basis (835-912-25-1).","When revenue is recognized at a point in time under 606-10-25-30 and costs are recognized as an asset under the costs-to-fulfill-a-contract guidance in Subtopic 340-40, those costs on a discrete project are qualifying assets while activities are underway to bring the asset to the condition and location necessary for its intended use (835-912-25-2).","For point-in-time contractors that bill all costs currently, the investment in the asset is limited to uncollected receivables, reduced by related non-interest-bearing liabilities such as accounts and wages payable and accrued payroll taxes (835-912-25-3).","Significant fluctuations in outstanding receivables and accrued costs may require daily accumulation by contract to determine amounts qualifying for interest capitalization (835-912-25-3).","The Subtopic follows the same scope and scope exceptions as Section 912-10-15 (835-912-15-1)."],"categories":["Initial measurement","Recognition","Industry-specific","Revenue"],"audience_level":"intermediate","student_note":"The exam trap is assuming construction-type contract assets are always \"qualifying assets\" for interest capitalization — for government contractors recognizing revenue over time, interest capitalization is flatly prohibited; it is only possible in point-in-time situations, and even then capped at uncollected receivables net of non-interest-bearing liabilities.","related_topics":["835-20","340-40","606-10","912-10","912-340"],"key_concepts":["capitalization of interest","qualifying asset","government contracts","revenue recognized over time","point-in-time revenue recognition","costs to fulfill a contract","assets employed in earnings activities","uncollected 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retrieval timestamps"}},{"number":"835-20","title":"Capitalization of Interest","topic_title":"Interest","score":0.7944,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:384c066839be4fb1bbcd589e35ada724e5e92a46f54e77d7a5d2e0441cada652","downloaded_from":"2026-09-10T01:48:54.719Z","last_downloaded_at":"2026-09-10T01:49:28.506Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"835-10","title":"Overall","topic_title":"Interest","score":0.75,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0604673792674f9b90251ba0986d157a3c1fc7fafa0cfec444e94dbeed1d00ea","downloaded_from":"2026-09-10T01:48:44.160Z","last_downloaded_at":"2026-09-10T01:48:52.102Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"835-932","title":"Extractive Activities—Oil and 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