# ASC 946-20-25: Financial Services—Investment Companies — Investment Company Activities — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/946/20/#25-recognition) 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): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:4f03611f64a5ed1c5acfe02779d0b9871a42aa90397cd35d4d8e384b54ad9f3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 946-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/946/20/#25-recognition) SEC content: no ##### [946-20-25-1](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:e459081a5ba3402fc6da0a403cc2af5b1d7da6993e8d4ebc481ff816037f588e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2013-08](https://asc.understandingaccounting.org/updates/asu-2013-08/). #### Payments by Affiliates ##### [946-20-25-2](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:bbd36630ad753db4b6f89683b2283f4f3d03d000f5a7c2133821af4be3b8f9c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A credit enhancement provided by an affiliate to maintain an investment's value shall be recognized when the enhancement becomes available to the fund. #### Certain Distribution Costs ##### [946-20-25-3](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:955dfbd503dd5acb68ec5e3b405bafe6752c89a48ff4005fd9028ea1ee73828d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this paragraph applies to annual and interim financial statements of investment companies that adopt plans that comply with Rule [12b-1](https://asc.understandingaccounting.org/glossary/b/#12b-1 "Rule 12b-1 in Chapter 17 of the Code of Federal Regulations is one of the regulations implementing the Investment Company Act of 1940."). A liability, with a corresponding charge to expense, shall be recognized by a fund with an [enhanced 12b-1 plan](https://asc.understandingaccounting.org/glossary/e/#enhanced-12b-1-plan "A reimbursement 12b-1 plan that provides that, on termination of the plan, the fund is required to continue paying the 12b-1 fee to the extent the distributor has excess costs.") for [excess costs](https://asc.understandingaccounting.org/glossary/e/#excess-costs "The cumulative distribution costs incurred by the distributor less the sum of cumulative 12b-1 fees paid, cumulative contingent-deferred sales load payments, and future cumulative contingent-deferred sales load payments by current shareholders, if reasonably estimable."). A liability for excess costs, computed in the same way as for an enhanced 12b-1 plan, shall be recorded by a fund with a [board-contingent plan](https://asc.understandingaccounting.org/glossary/b/#board-contingent-plan "A reimbursement 12b-1 plan that provides that, on the plan's termination, a fund's board of directors has the option, but not the requirement, to pay the distributor for any excess costs incurred by the distributor.") when the fund's board commits to pay such costs. Example 1 (see paragraph [946-20-55-1](https://asc.understandingaccounting.org/asc/946/20/#946-20-55-1)) illustrates this guidance. #### Expense Limitation Agreements ##### [946-20-25-4](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-4) Pending content: yes Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:7c7cf2d1e6f4200e0b77234261f5fe8e1e71c9c3b73778c8fd60fc12ca997bec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for excess expenses shall be recognized if, and to the extent that, the expense limitation agreement's established terms for repayment of the excess expenses to the adviser by the fund and the attendant circumstances meet the criteria in paragraphs 36(a), 36(b), and 36(c) of FASB Concepts Statement No. 6, Elements of Financial Statements, and the criteria in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2). In most instances, a liability will not be recorded because it is not likely that excess expenses under such plans will meet those criteria before amounts are actually due to the adviser under the reimbursement agreement. If an assessment of the specific circumstances (such as an agreement to reimburse for either an unlimited period or a period substantially greater than that necessary for the fund to demonstrate its economic viability or an obligation to reimburse the servicer remains even after the cancellation of the fund's contract with the servicer) indicates that those criteria are met, a liability shall be recorded. Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9)A liability for excess expenses shall be recognized if, and to the extent that, the expense limitation agreement's established terms for repayment of the excess expenses to the adviser by the fund and the attendant circumstances meet all of the following criteria: 1. a The excess expense or expenses embody a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand. 2. b The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice. 3. c The transaction or other event obligating the entity has already happened. 4. d The guidance in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2). In most instances, a liability will not be recorded because it is not likely that excess expenses under such plans will meet those criteria before amounts are actually due to the adviser under the reimbursement agreement. If an assessment of the specific circumstances (such as an agreement to reimburse for either an unlimited period or a period substantially greater than that necessary for the fund to demonstrate its economic viability or an obligation to reimburse the servicer remains even after the cancellation of the fund's contract with the servicer) indicates that those criteria are met, a liability shall be recorded. #### Offering Costs ##### [946-20-25-5](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:b4d6369945b82b37c98733bfa1add690c4975074ca0a81fcd460f969d1fba560 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Offering costs](https://asc.understandingaccounting.org/glossary/o/#offering-costs "Offering costs include all of the following: Legal fees pertaining to the investment company's shares offered for sale Securities and Exchange Commission (SEC)and state registration fees Underwriting and other similar costs Costs of printing prospectuses for sales purposes Initial fees paid to be listed on an exchange Tax opinion costs related to offering of shares Initial agency fees of securing the rating for bonds or preferred stock issued by closed-end funds.") of [closed-end funds](https://asc.understandingaccounting.org/glossary/c/#closed-end-funds "Closed-end funds are investment companies that issue a fixed number of shares (that generally trade on an open market) to raise capital, similar to the way in which an entity sells stock in an initial public offering.") and investment partnerships shall be charged to paid-in capital upon sale of the shares or units. ##### [946-20-25-6](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:4c843a8b8cd9c4d0e5e6a522ed628244d8e45d35b0b47da96c241abbdec7977c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Offering costs of open-end investment companies and of closed-end funds with a continuous offering period shall be recognized as a deferred charge. #### Capital Share Transactions ##### [946-20-25-7](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:bad4b31b312de2f85a2d90cc96a6a2703b50c7c7295bf1d214e829ba45299fd2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting for shareholder transactions of open-end funds differs from the accounting followed by commercial entities in several key aspects. Sales of fund shares are recorded daily by crediting capital stock for the par value of the stock to be issued and additional paid-in capital for the amount paid over the par value; redemptions are recorded daily by debiting those accounts. The offsetting debit (credit), however, is made to an asset (liability) account, typically captioned as receivable for fund shares sold (payable for fund shares redeemed). These entries are made on or as of the date the order to purchase or sell fund shares is received (trade date), not on the day the payment is due (settlement date) as is typical practice for the recording of issuance of equity shares by commercial entities. ##### [946-20-25-8](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:4ab3c757a518dd989fbe36ad3ba44ae3c911f11b196febc91a5e51179bea8c93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Investment partnerships shall record capital subscription and redemption commitments as of the date required by the partnership agreement. Cash received before this date shall be recorded as an advance capital contribution liability. #### Dividends ##### [946-20-25-9](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:47a7c92b94b65bfb70f6a58e92ea55d2a689b6ac13232be114224d7a931e1a43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Both closed-end and open-end investment companies record distribution liabilities on the ex-dividend date rather than the declaration date. For closed-end investment companies, a purchaser typically is not entitled to a dividend for shares purchased on the ex-dividend date. Open-end investment companies record the liability on the ex-dividend date to properly state the net asset value at which sales and redemptions are made. When large (in excess of 15 percent of a closed-end fund's net asset value) dividends or distributions are declared, it is the policy of some exchanges to postpone the ex-dividend date until the dividend has been paid. In such circumstances, the liability for the dividend distribution would be recorded on the books of the fund on the payment date. #### Performance Fees ##### [946-20-25-10](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:54164ad9ee653b972974a40c1732c45ce3d30a5a2ee91bb672ba5166d9868fd1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Performance fees by an investment adviser under an investment advisory agreement shall be accrued at interim dates based on actual performance through the accrual date. #### Portfolio Insurance ##### [946-20-25-11](https://asc.understandingaccounting.org/asc/946/20/#946-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:19:42.174Z to 2026-09-10T02:19:42.174Z Record version: sha256:c82a68a9b29bd8c5b67ef1a21b54dc9f6b2c64bb7709cae1f0a968a6ac4af7ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If insurance applies only to the fund's portfolio, it does not have a measurable [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") in the absence of default of the underlying securities or of indications of the probability of default and, accordingly, the cost of the policy should be treated as an operating expense.