{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/910/20/","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":"910-20","topic":"910","title":"Contract Costs","area":"Industry","paragraphs":11,"summary":"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.","concepts":["contract costs","use rate theory","equipment cost allocation","idle equipment time","small tools","unapproved change orders and claims","progress payments","construction contractors"],"categories":["Industry-specific","Initial measurement","Disclosure","Inventory and PP&E"],"level":"intermediate","topic_title":"Contractors—Construction","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"910-20-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
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910-20-25-5 Superseded Accounting Standards Update No. 2014-09 05/28/2014
910-20-60-1 Superseded Maintenance Update 2019-01 (PDF) 01/08/2019
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This Subtopic addresses accounting for contract costs by construction contractors.
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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 910-10-15.
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Operating unit costs for construction equipment may be included in contract cost using the use rate theory.
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A rate may be arrived at, which, based on the reported use of the equipment, will serve as a basis for charging the contracts on which the equipment is used. The cost of a contractor's equipment shall be allocated to the particular contract on which it is used on a reasonable basis, such as time, hours of use, or mileage.
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Idle equipment time, for example if a contractor's equipment is idle during a winter season, may be considered in determining indirect cost allocations. Allocation of idle equipment costs to contracts by use of rates geared to cover all costs is appropriate. That procedure results in rates that lessors of the same type of equipment charge users in the same location, except for the profit element.
","snippet":"Idle equipment time, for example if a contractor's equipment is idle during a winter season, may be considered in determining indirect cost allocations. Allocation of idle equipment costs to contracts by use of rates gea…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fbc366a90a5fb618f78f0b4b4841df64aeb738444c841f4b4ca6871ba4e9353","downloaded_from":"2026-09-10T02:09:41.664Z","last_downloaded_at":"2026-09-10T02:09:41.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482388","source_sha256":"d875f96e8ccd7752e5a56face3bf31058245d763b40aecfdabbc385a592ea401"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3fcf4024a52583be76b92d4e0ff13826a7e56de1960201d0b60e9f3ed0a3828e","downloaded_from":"2026-09-10T02:09:41.664Z","last_downloaded_at":"2026-09-10T02:09:41.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482388","source_sha256":"d875f96e8ccd7752e5a56face3bf31058245d763b40aecfdabbc385a592ea401"}},{"block":null,"heading":"Small Tools","paragraphs":[{"citation":"910-20-25-4","para":"25-4","html":"
Small tools may be accounted for as inventory or fixed assets. Small tools shall be charged to a contract as they are consumed in performance of the contract. Operating and maintenance costs of miscellaneous small tools and equipment are usually charged to overhead accounts rather than specific contracts. However, a contractor may charge the costs directly to specific contracts if they relate to specific contracts. Small tools can frequently be charged to contracts if purchased for the contracts or if issued from a central pool. Contract costs shall be credited with estimated salvage value of small tools remaining at completion of the contracts.
","snippet":"Small tools may be accounted for as inventory or fixed assets. Small tools shall be charged to a contract as they are consumed in performance of the contract. Operating and maintenance costs of miscellaneous small tools …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c0272392f3f5f82b7b40f5e574309dd7db3c15fc80da57aec192fdd23d60a49","downloaded_from":"2026-09-10T02:09:41.664Z","last_downloaded_at":"2026-09-10T02:09:41.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482388","source_sha256":"d875f96e8ccd7752e5a56face3bf31058245d763b40aecfdabbc385a592ea401"}},{"citation":"910-20-25-5","para":"25-5","html":"
Paragraph superseded by Accounting Standards Update No. 2014-09.
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In applying the use rate theory (see paragraph 910-20-25-1), all of the following factors shall be considered:
  1. a
    The cost of the equipment, less estimates of its salvage value or rental if it is leased
  2. b
    The probable life of the equipment
  3. c
    The average idle time during the life or period of hire of the equipment
  4. d
    The costs of operating the equipment, such as repairs, storage, insurance, and taxes.
","snippet":"In applying the use rate theory (see paragraph 910-20-25-1), all of the following factors shall be considered:\n(a) The cost of the equipment, less estimates of its salvage value or rental if it is leased\n(b) The probable…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b41d1b97cfa2f08e1e610aa2ce9dd5f214fcf2417e8fac724f576658c3f3c5d3","downloaded_from":"2026-09-10T02:09:44.538Z","last_downloaded_at":"2026-09-10T02:09:44.538Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482355","source_sha256":"b083f0aa32718039f40461ef2fcbcd1991f833a2adf636f1fa6daf1d5f725fdd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed9430d4d468e8ffd52445d1812c88ac80a0c6181f7427b5204401adeb4e5ba6","downloaded_from":"2026-09-10T02:09:44.538Z","last_downloaded_at":"2026-09-10T02:09:44.538Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482355","source_sha256":"b083f0aa32718039f40461ef2fcbcd1991f833a2adf636f1fa6daf1d5f725fdd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cfcf6ac6980708521099346b337a95fdc82f8d5d2a688eedcdd532871688190e","downloaded_from":"2026-09-10T02:09:44.538Z","last_downloaded_at":"2026-09-10T02:09:44.538Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482355","source_sha256":"b083f0aa32718039f40461ef2fcbcd1991f833a2adf636f1fa6daf1d5f725fdd"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"910-20-50-1","para":"50-1","html":"
Both of the following amounts included in contract costs shall be disclosed:
  1. a
    The 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)
  2. b
    The amount of progress payments netted against contract costs at the date of the balance sheet.
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Paragraph superseded by Accounting Standards Update No. 2014-09.
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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":["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))."],"categories":["Industry-specific","Initial measurement","Disclosure","Inventory and PP&E"],"audience_level":"intermediate","student_note":"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.","related_topics":["910-10","910-405","606-10","340-40","912-20"],"key_concepts":["contract costs","use rate theory","equipment cost allocation","idle equipment time","small tools","unapproved change orders and claims","progress payments","construction contractors"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a1dab2881ac0154ef32515e4ecc5c127ebab983a9d72e3d558cb2eb0e9d93096","downloaded_from":"2026-09-10T02:09:32.963Z","last_downloaded_at":"2026-09-10T02:09:53.961Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval 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