# ASC 835-912: Interest — Contractors—Federal Government Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/835/912/) 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): 2026-09-10T01:50:19.327Z to 2026-09-10T01:50:30.147Z Record version: sha256:48e8a3711b027e68ec82198a778190cd5bee6a92bedc3a8117bd3603721b81ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-912: Interest — Contractors—Federal Government ### Machine-generated study aids ```json { "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 receivables" ] } ``` Source downloaded (UTC): 2026-09-10T01:50:19.327Z to 2026-09-10T01:50:19.327Z Record version: sha256:8edeffcff7102657bdd5c462d73f1318c1d1729e8307006e7d1f4cc853239f0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-912-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/835/912/#00-status) SEC content: no ##### [835-912-00-1](https://asc.understandingaccounting.org/asc/835/912/#835-912-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:19.327Z to 2026-09-10T01:50:19.327Z Record version: sha256:16fd82cbe4c289ce090540c062c5858f2be54e68ee0a48d9586e80dcd6974b68 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
ContractAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
912-835-25-1 through 25-3
AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:50:22.149Z to 2026-09-10T01:50:22.149Z Record version: sha256:518f35d7b6994240451d3af14f692ca243852c421be8617757f41ed468664073 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-912-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/835/912/#05-overview-and-background) SEC content: no ##### [835-912-05-1](https://asc.understandingaccounting.org/asc/835/912/#835-912-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:22.149Z to 2026-09-10T01:50:22.149Z Record version: sha256:11ca1f715c16704a32a554923a53b4fec705b44ed23a117de89b95527a3b3501 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to government contractors related to capitalization of interest. Source downloaded (UTC): 2026-09-10T01:50:24.659Z to 2026-09-10T01:50:24.659Z Record version: sha256:f649cbe5e26fab2cb447e4fadc90718b783148a97a2786ae6d0bf3e883a43188 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-912-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/835/912/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [835-912-15-1](https://asc.understandingaccounting.org/asc/835/912/#835-912-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:24.659Z to 2026-09-10T01:50:24.659Z Record version: sha256:374dd2502045506c816027d3c74a82998a631a31af527a04369fb6405edf5b4d 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. 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.