# ASC 912-20: Contractors—Federal Government — Contract Costs Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/912/20/) 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): 2026-09-10T02:10:07.952Z to 2026-09-10T02:10:28.388Z Record version: sha256:9e3b037477c44d1053c74a7432583a2506f64bdd238af034a65b0b03e46c8083 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20: Contractors—Federal Government — Contract Costs ### Machine-generated study aids ```json { "summary": "ASC 912-20 governs how contractors with the federal government account for contract costs, including the requirement to follow Federal Acquisition Regulation cost principles when costs are analyzed in the procurement process. It addresses allocation of indirect costs, recording of subcontractor/vendor claims, accounting for terminations (convenience versus default), and restricts the use of program accounting. Losses from default terminations are treated as changes in accounting estimate in the current period, not as prior-period adjustments.", "key_points": [ "Federal Acquisition Legislation and Regulation cost principles must be followed in pricing negotiated supply, service, and R&D contracts and modifications whenever cost analysis is performed (912-20-05-2), and in cost-reimbursement determinations, overhead rate negotiations, terminations, incentive contract final pricing, price redeterminations, and pricing contract modifications (912-20-05-3).", "Indirect costs allowable or allocable under government contract regulations may be allocated to federal government contracts as indirect costs only if also allowable under GAAP (912-20-25-1).", "Subcontractor and other vendor claims are recorded as liabilities at estimated amounts payable under Subtopic 450-20, and amounts recoverable by the prime contractor are included as part of the claim (912-20-25-3).", "Because the parties' rights differ, default termination accounting must reflect additional liabilities such as damages, excess reprocurement costs, and progress payments to be repaid (912-20-25-4).", "A reduction of previously recorded earnings from a default termination is included in the current-period loss on termination as a change in accounting estimate under Subtopic 250-10; prior-period adjustment is not appropriate (912-20-25-5).", "Program accounting accumulates costs by program (estimated units in a continuing long-term production effort) rather than by unit or contract, but is not appropriate for government contracts or subcontracts except in the limited circumstances of paragraph 912-20-25-6 (912-20-25-5A, 25-8).", "A loss on termination for default must either be reported as a separate income statement item or disclosed in the notes in conformity with Subtopic 450-20 (912-20-45-5; 912-20-50-1)." ], "categories": [ "Industry-specific", "Recognition", "Presentation", "Disclosure" ], "audience_level": "intermediate", "student_note": "Government contracting adds a regulatory overlay to GAAP: a cost must be allowable under FAR cost principles *and* under GAAP to be charged to a federal contract. A common misunderstanding is treating a default-termination loss as a prior-period adjustment—it is a current-period change in estimate under ASC 250-10.", "related_topics": [ "912-10", "912-220", "450-20", "250-10", "606", "605-35" ], "key_concepts": [ "government contract cost principles", "allowable and allocable indirect costs", "termination for convenience", "termination for default", "subcontractor claims", "program accounting", "change in accounting estimate", "cost-reimbursement contracts" ] } ``` Source downloaded (UTC): 2026-09-10T02:10:07.952Z to 2026-09-10T02:10:07.952Z Record version: sha256:14ca9a6c69d43b3745eb3d35b1a9849e97b28cfffd080d748211182b324b7222 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/912/20/#00-status) SEC content: no ##### [912-20-00-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:07.952Z to 2026-09-10T02:10:07.952Z Record version: sha256:6e5315c4ea925d0ab1e98ad66eaedceb0879c6a910e2590454a5d8ba5e15b50b 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
912-20-45-1SupersededAccounting Standards Update No. 2014-0905/28/2014
912-20-45-4AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T02:10:10.373Z to 2026-09-10T02:10:10.373Z Record version: sha256:a767859287ddc778793cfec45a9d0943688cd2afc0a17506b295ff0b9a0d123c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/912/20/#05-overview-and-background) SEC content: no ##### [912-20-05-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:10.373Z to 2026-09-10T02:10:10.373Z Record version: sha256:e0a181808f52e36e039a7ef6728f0383e808f79b96788f2ea306c8463780d05c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to government contractors on accounting costs related to federal government contracts. #### Federal Acquisition Legislation and Regulations ##### [912-20-05-2](https://asc.understandingaccounting.org/asc/912/20/#912-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:10.373Z to 2026-09-10T02:10:10.373Z Record version: sha256:532dcac34b545fb07733d883ddf088c3caeff43396e044b0711767b8e618d3fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All federal government contracts and contract modifications for supplies and services or experimental, developmental, or research work, negotiated on the basis of cost with commercial entities (whether on a fixed-price or cost-plus basis), must adhere to the cost principles mandated by Federal Acquisition Legislation and Regulations in pricing negotiated supply, service, experimental, developmental, and research contracts and contract modifications whenever cost analysis is to be performed in the procurement process. ##### [912-20-05-3](https://asc.understandingaccounting.org/asc/912/20/#912-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:10.373Z to 2026-09-10T02:10:10.373Z Record version: sha256:67206cd2c01da260dd2b7662be5cdc0de07c954efd909d3517a215e578a6a25f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, compliance with Federal Acquisition Legislation and Regulation cost principles is mandatory if an entity is involved in any of the following activities: 1. a Determining reimbursable costs under cost-reimbursement contracts, including any cost-reimbursement subcontracts, and the cost-reimbursement portion of time and materials contracts 2. b Negotiating overhead rates 3. c Proposing, negotiating, and determining costs under terminated fixed-price, cost-reimbursement contracts 4. d Establishing the final price of fixed-price incentive contracts 5. e Redetermining prices of prospective and retroactive price redetermination contracts 6. f Pricing changes in contract modifications. #### Convenience Terminations ##### [912-20-05-4](https://asc.understandingaccounting.org/asc/912/20/#912-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:10.373Z to 2026-09-10T02:10:10.373Z Record version: sha256:583cde39caff69aa7fb7ed26462de639cd3b88112d4a26fe66ffb98be70fdfa8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Termination of war and defense contracts for the convenience of the government is a means of adjusting the production of materials to the varying requirements of the military services. Because terminations transfer active contracts in process of execution into claims in process of liquidation, they, like contract renegotiations and cost-plus-fixed-fee contracts, may have important effects on the financial statements of defense contractors. ##### [912-20-05-5](https://asc.understandingaccounting.org/asc/912/20/#912-20-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:10.373Z to 2026-09-10T02:10:10.373Z Record version: sha256:67db5ebcf042b5000ac47032512611cf4b5fbf7af71ee0f208b741caed312d46 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). Source downloaded (UTC): 2026-09-10T02:10:14.001Z to 2026-09-10T02:10:14.001Z Record version: sha256:230519ad9bfafab6479c8be7c0fdeee9eb3d7f92501dde65fa20ae36e9f51ee9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/912/20/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [912-20-15-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:14.001Z to 2026-09-10T02:10:14.001Z Record version: sha256:89ce35093f51467e5ae9922e9dfd4c2fc56b20ba0a69556c0464705252b214b3 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): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:7fd8b4ad78e922be57fe22e6753fd93f82c6a5c5cf9544da3555f30257c32f36 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/912/20/#25-recognition) SEC content: no #### Costs Allocated to Contracts ##### [912-20-25-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:211932e993cd062d074d064cf9ebafb1d3db0d478f7d6d46ebfa2e458863d770 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Indirect costs that are allowable or allocable under pertinent government contract regulations may be allocated to federal government contracts as indirect costs if otherwise allowable under generally accepted accounting principles (GAAP) . ##### [912-20-25-2](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:dbf327c90eb76653fcf773c9c9139f0ffd4b74b7ad19c7e8b8b500fc247a3a6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Convenience Terminations ##### [912-20-25-3](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:ee155183b37aa738bbf5bbbafdd2360119dc34934aff0a460238695fc4ac989a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Subcontractor claims](https://asc.understandingaccounting.org/glossary/s/#subcontractor-claims "Those obligations of a contractor to a subcontractor that arise from the subcontractor's costs incurred through transactions that were related to a contract terminated but did not result in the transfer of billable materials or services to the contractor before termination.") and other vendor claims shall be recorded as liabilities at the estimated amounts payable in conformity with the provisions of Subtopic 450-20. To the extent such amounts are recoverable by the prime contractor, they shall be included as part of the claim. #### Default Terminations ##### [912-20-25-4](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:7c8bddd393d9b649a65d58c72cc4c6d9eabba813ec30d95ca7380e6fb6130501 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rights of the contracting parties in a default termination of a fixed-price contract differ significantly from those in a convenience termination; consequently, the accounting must reflect these differences. Contractors shall record, in addition to normal contract liabilities, those liabilities arising from a default termination (for example, damages, excess reprocurement costs, and progress payments to be repaid). ##### [912-20-25-5](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:3b20fbec9b8b3187aaa446a9b22b52aa4e32743aac9b3ab8b3f4c0abe9026199 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If termination for default results in a reduction of previously recorded earnings the resulting income effect shall be included in the loss on termination of the contract in the current period as a change in an accounting estimate in conformity with Subtopic 250-10. In such circumstances, adjustments of prior-period amounts are not appropriate. #### Program Accounting ##### [912-20-25-5A](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-5A) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:01ef39596388f157741a781827e40395a9ceb7b19f4bfdfbc0802c622fdf7164 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Program accounting is a method of accounting for the costs of certain products manufactured for delivery under production-type contracts. Under this method, costs are accumulated and accounted for by programs rather than by individual units or individual contracts. A program consists of the estimated number of units of a product to be produced by an entity in a continuing, long-term production effort for delivery under existing and anticipated contracts. The program is used as the accounting cost center for accumulating costs and allocating costs to cost of sales. ##### [912-20-25-6](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:21cefc03f853e94db475195a3575ec37e8be7039684aa1e97c647b6c5b35ceb3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In practice, the program method of accounting has had very limited applications, such as in major commercial aircraft production sold to commercial (or, in some cases, commercial and government) customers. It is not often used because of all of the following: 1. a The significant uncertainties associated with making reasonably dependable estimates of the total number of units to be produced and sold 2. b The length of time to produce and sell them 3. c The associated production costs and selling prices. ##### [912-20-25-7](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:0ee25e2f4eba6fef58fea1c3607ac5f9c6e823d7b930f9947589ba6152d3881e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The unique aspects of the government procurement process make estimating the market and timing of deliveries extremely difficult. For example, estimating quantities and prices of future purchases by the government would be affected directly by the amount and timing of funding allocated to the program. If funding were reduced or eliminated, the effect on the program could be substantial. ##### [912-20-25-8](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:21.617Z to 2026-09-10T02:10:21.617Z Record version: sha256:a730f02e164e05a385d073d28e688c2544ff680a3eff310d01e8208886e27438 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, the government, rather than the contractor, often retains rights to tooling and design data. This limits the potential market of the contractor and increases the risk of estimating the total market for a program by narrowing its potential customer base. Therefore, the program method of accounting is not appropriate for government contracts or subcontracts except as provided in paragraph [912-20-25-6](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-6). Source downloaded (UTC): 2026-09-10T02:10:23.981Z to 2026-09-10T02:10:23.981Z Record version: sha256:1d869cba2eb95af7c08c20622fb71e77ee39761bf6722cf7bc1dcb83534a9289 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/912/20/#45-other-presentation-matters) SEC content: no ##### [912-20-45-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:23.981Z to 2026-09-10T02:10:23.981Z Record version: sha256:7ba934f051437d2d806162f02f532973a7ae8e9ab142c1d4e7a816c251b0a03c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [912-20-45-2](https://asc.understandingaccounting.org/asc/912/20/#912-20-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:23.981Z to 2026-09-10T02:10:23.981Z Record version: sha256:98bf174ac4b7e42a1479f5b1e28f093fd3b00dc9884db6e668ffb46cae630aef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [912-20-45-3](https://asc.understandingaccounting.org/asc/912/20/#912-20-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:23.981Z to 2026-09-10T02:10:23.981Z Record version: sha256:6613f986d9ea2a4b34d8a2169207fe6fe46003ab0015e3194380fd322b34a93a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Income Statement ##### [912-20-45-4](https://asc.understandingaccounting.org/asc/912/20/#912-20-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:23.981Z to 2026-09-10T02:10:23.981Z Record version: sha256:422ac37e20c50541f89e42df8c7f7c219b2dfad9154d4187873dbbe90e57c6ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on presentation of terminated contracts, see Section 912-220-45. ##### [912-20-45-5](https://asc.understandingaccounting.org/asc/912/20/#912-20-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:23.981Z to 2026-09-10T02:10:23.981Z Record version: sha256:ecc765fff4d160731c123c8b622a75fd9d6c8dcccb6cad680e831d6e3356e2d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A loss on termination of a contract for default shall either be reported as a separate item in the income statement or disclosed in accordance with paragraph [912-20-50-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-50-1). Source downloaded (UTC): 2026-09-10T02:10:26.295Z to 2026-09-10T02:10:26.295Z Record version: sha256:66f7e7bed873a191fb52985861dff3dac117f579ccb87c2c3f03b0739e5f68df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 912-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/912/20/#50-disclosure) SEC content: no #### Default Terminations ##### [912-20-50-1](https://asc.understandingaccounting.org/asc/912/20/#912-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:10:26.295Z to 2026-09-10T02:10:26.295Z Record version: sha256:f7c9db5b48b7e4eaa7107050a560235c9a5e388873a087f4546d78a155f76614 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A loss on termination of a contract for default that is not reported as a separate item in the income statement pursuant to paragraph [912-20-45-5](https://asc.understandingaccounting.org/asc/912/20/#912-20-45-5) shall be disclosed in the notes to financial statements in conformity with Subtopic 450-20.