ASC 910-20
Contract Costs
910 Contractors—Construction
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ASC 910-20 governs how construction contractors account for contract costs, focusing on charging equipment and small tool costs to specific contracts. Equipment cost is allocated to contracts on a reasonable basis (time, hours of use, or mileage) using a "use rate" that considers equipment cost less salvage/rental, probable life, average idle time, and operating costs. It also requires disclosure of unapproved change orders and claims included in contract costs and of progress payments netted against contract costs.
Key points (7)
- Operating unit costs for construction equipment may be included in contract cost under the use rate theory (910-20-25-1).
- Equipment cost must be allocated to the particular contract on which it is used on a reasonable basis such as time, hours of use, or mileage (910-20-25-2).
- Idle equipment time (e.g., a winter shutdown) may be considered in indirect cost allocations, and rates geared to cover all costs—approximating market lease rates without the profit element—are appropriate (910-20-25-3).
- Small tools may be accounted for as inventory or fixed assets and are charged to a contract as consumed; operating and maintenance costs of miscellaneous small tools are usually charged to overhead unless they relate to specific contracts, and contract costs must be credited with estimated salvage value of tools remaining at completion (910-20-25-4).
- In applying the use rate theory, consider equipment cost less salvage value or rental if leased, probable life, average idle time, and operating costs such as repairs, storage, insurance, and taxes (910-20-30-1).
- Disclose the aggregate amount in contract costs representing unapproved change orders, claims, or similar uncertain items, with a description of nature, status, and recording basis (cost or realizable value) (910-20-50-1(a)).
- Disclose the amount of progress payments netted against contract costs at the balance sheet date (910-20-50-1(b)).
For students. Exam questions here usually test whether a given cost is a direct contract cost, overhead, or a use-rate allocation—remember that idle equipment cost is not simply expensed but can be built into the use rate. A common misunderstanding is thinking all small tool costs go directly to contracts; operating and maintenance costs of miscellaneous small tools normally go to overhead, and remaining tools' salvage value must be credited back to contract costs.
Machine-generated study aid for ASC 910-20. Check the source paragraphs below.
910-20-00Status
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| Paragraph | Action | Accounting Standards Update | Date |
| 910-20-25-4 | Amended | Maintenance Update 2019-01 (PDF) | 01/08/2019 |
| 910-20-25-5 | Superseded | Accounting Standards Update No. 2014-09 | 05/28/2014 |
| 910-20-60-1 | Superseded | Maintenance Update 2019-01 (PDF) | 01/08/2019 |
910-20-05Overview and Background
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910-20-15Scope and Scope Exceptions
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Overall Guidance
910-20-25Recognition
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Operating Unit Cost for Construction Equipment
Small Tools
910-20-30Initial Measurement
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Operating Unit Cost for Construction Equipment
- aThe cost of the equipment, less estimates of its salvage value or rental if it is leased
- bThe probable life of the equipment
- cThe average idle time during the life or period of hire of the equipment
- dThe costs of operating the equipment, such as repairs, storage, insurance, and taxes.
910-20-50Disclosure
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- aThe aggregate amount included in contract costs representing unapproved change orders, claims, or similar items subject to uncertainty concerning their determination or ultimate realization, plus a description of the nature and status of the principal items comprising such aggregate amounts and the basis on which such items are recorded (for example, cost or realizable value)
- bThe amount of progress payments netted against contract costs at the date of the balance sheet.
910-20-60Relationships
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