ASC

ASC 910-10

Overall

910 Contractors—Construction

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In brief

IntermediateIndustry-specificPresentationDisclosureRevenue

ASC 910-10 is the Overall subtopic of the Contractors—Construction Topic, providing incremental industry-specific guidance for entities that perform construction-type contracts (work built or improved on tangible property to a customer's specifications, usually at the customer's job site under a unique, bid or negotiated contract). Most of its former revenue guidance was superseded by ASU 2014-09, so revenue recognition now follows Topic 606; what remains addresses small-tool depreciation, classification of retainages, proportionate gross presentation for construction joint ventures, and industry disclosures. Entities in scope must also comply with all other applicable GAAP not addressed here (910-10-15-1).

Key points (7)
  • The Topic supplies only incremental industry guidance for contractors performing construction-type contracts; such entities must also comply with all otherwise applicable standards (910-10-15-1 through 15-2).
  • Defining industry characteristics: contracts are bid or negotiated for a unique property built to customer specification at the customer's site, priced on estimated cost plus desired margin, often bonded, with costs and revenues accumulated by individual contract over more than one period (910-10-15-3 through 15-4); the four pricing types are fixed-price/lump-sum, unit-price, cost-type, and time-and-materials.
  • Depreciation of small tools carried in fixed assets may be charged either to overhead or to specific contracts (910-10-35-1); see 910-20-25-4 for recognition of small tools.
  • Retainages not collectible within one year (or within the operating cycle if longer) are classified as noncurrent on a classified balance sheet (910-10-45-1).
  • Proportionate gross financial statement presentation of an equity-method investment in an unincorporated legal entity is permitted only when the investee is in the construction or an extractive industry (910-10-45-4; 810-10-45-14).
  • Disclosures include the method of reporting by affiliated entities, the range of contract durations if the operating cycle exceeds one year, and liquidity characteristics of specific assets and liabilities if the operating cycle exceeds one year or an unclassified balance sheet is used (910-10-50-2 through 50-3).
  • For receivables maturing after one year, disclose amounts (and, if practicable, amounts by year) and interest rates; for billed but unpaid contract retainages, disclose the amounts, the portion expected to be collected after one year, and if practicable the years of collection (910-10-50-6 through 50-7); revenue recognition itself is governed by Topic 606 (910-10-60-1).

For students. Post-ASU 2014-09 the old percentage-of-completion machinery lives in Topic 606, so the common mistake is treating ASC 910 as the revenue standard for contractors; what survives here is mainly balance-sheet classification (retainages), the construction-industry exception permitting proportionate gross presentation of unincorporated joint ventures, and industry disclosures.

construction-type contractsretainageoperating cycleincremental industry guidanceproportionate gross presentationconstruction joint venturesmall toolscontract receivables disclosure

Machine-generated study aid for ASC 910-10. Check the source paragraphs below.

910-10-00Status

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910-10-05Overview and Background

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910-10-05-1
The Contractors—Construction Topic provides incremental industry-specific guidance on the application of generally accepted accounting principles (GAAP) in accounting for the performance of contracts for which specifications are provided by the customer for the construction of facilities or the production of goods or for the provision of related services.

910-10-10Objectives

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910-10-10-1
The objective of this Topic and the related Subtopics is to present incremental accounting principles specifically related to construction contractors.

910-10-15Scope and Scope Exceptions

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Overall Guidance

910-10-15-1
The Subtopics within the Contractors—Construction Topic only provide incremental industry-specific guidance for the entities defined in this Scope Section, or as further defined in the Scope Sections of the individual Subtopics. Entities within the scope of this Topic shall also comply with the applicable standards not included in this Topic.

Entities

910-10-15-2
The Contractor Accounting—Construction Contractors Topic provides guidance for entities that perform construction-type contracts.
910-10-15-3
Although the construction industry is difficult to define because of its diversity, certain characteristics are common to entities in the industry. The most basic characteristic is that work is performed under contractual arrangements with customers. A contractor, regardless of the type of construction activity or the type of contractor, typically enters into an agreement with a customer to build or to make improvements on a tangible property to the customer's specification. The contract with the customer specifies the work to be performed, specifies the basis of determining the amount and terms of payment of the contract price, and generally requires total performance before the contractor's obligation is discharged. Unlike the work of many manufacturers, the construction activities of a contractor are usually performed at job sites owned by customers rather than at a central place of business, and each contract usually involves the production of a unique property rather than repetitive production of identical products.
910-10-15-4
Other characteristics common to contractors and significant to accountants and users of financial statements include the following:
  1. a
    A contractor normally obtains the contracts that generate revenue or sales by bidding or negotiating for specific projects.
  2. b
    A contractor bids for or negotiates the initial contract price based on an estimate of the cost to complete the project and the desired profit margin, although the initial price may be changed or renegotiated.
  3. c
    A contractor may be exposed to significant risks in the performance of a contract, particularly a fixed-price contract.
  4. d
    Customers (usually referred to as owners) frequently require a contractor to post a performance and a payment bond as protection against the contractor's failure to meet performance and payment requirements.
  5. e
    The costs and revenues of a contractor are typically accumulated and accounted for by individual contracts or contract commitments extending beyond one accounting period, which complicates the management, accounting, and auditing processes.
  6. f
    The nature of a contractor's risk exposure varies with the type of contract. The several types of contracts used in the construction industry are described in paragraphs
    605-35-15-2 through 15-5
    . The four basic types of contracts used based on their pricing arrangements are fixed-price or lump-sum contracts, unit-price contracts, cost-type contracts, and time-and-materials contracts.

910-10-35Subsequent Measurement

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Small Tools

910-10-35-1
Depreciation of small tools carried in fixed assets may be charged to overhead or to specific contracts. See paragraph 910-20-25-4 for recognition guidance on small tools.

910-10-45Other Presentation Matters

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Receivables

910-10-45-1
The portion of retainages not collectible within one year, or within the operating cycle if it is longer than one year, shall be classified as noncurrent in a classified balance sheet.

Consolidation—Investment in an Unincorporated Legal Entity

910-10-45-4
Paragraph 810-10-45-14 explains that a proportionate gross financial statement presentation is not appropriate for an investment in an unincorporated legal entity accounted for by the equity method of accounting unless the investee is in either the construction industry (as discussed in this Topic) or an extractive industry (see paragraphs 930-810-45-1 and 932-810-45-1).

910-10-50Disclosure

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910-10-50-1
This Subtopic provides guidance on disclosures specific to the construction industry.

Accounting Policies

910-10-50-2
Construction contractors shall follow the general disclosure requirements of Subtopic 235-10. Significant accounting policy disclosures relating to construction contractors include both of the following:
  1. a
    Information relating to the method of reporting by affiliated entities shall be disclosed.
  2. b
    If the operating cycle exceeds one year, the range of contract durations shall be disclosed.

Liquidity Characteristics

910-10-50-3
An entity shall disclose liquidity characteristics of specific assets and liabilities if either of the following conditions is met:
  1. a
    The entity's operating cycle exceeds one year.
  2. b
    The entity uses an unclassified balance sheet.

Receivables

910-10-50-6
Both of the following shall be disclosed for receivable amounts maturing after one year:
  1. a
    The amount maturing after one year and, if practicable, the amounts maturing in each year
  2. b
    Interest rates on major receivable items, or on classes of receivables, maturing after one year or an indication of the average interest rate or the range of rates on all receivables.
910-10-50-7
If receivables include amounts representing balances billed but not paid by customers under contract retainage provisions, a contractor shall disclose, either in the balance sheet or in a note to financial statements, all of the following:
  1. a
    The amounts
  2. b
    The portion, if any, expected to be collected after one year
  3. c
    If practicable, the years in which the amounts are expected to be collected.

910-10-60Relationships

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Revenue Recognition

910-10-60-1
For guidance on accounting for revenue recognition of construction-type contracts, see Topic 606.

Related subtopics