# ASC 980-10: Regulated Operations — Overall Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/980/10/) 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): 2026-09-10T02:27:16.483Z to 2026-09-10T02:27:45.235Z Record version: sha256:db832df2bca08637f8a5f8f1b1bcf5312f12f53d0d0854ad0b301cf21a329767 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10: Regulated Operations — Overall ### Machine-generated study aids ```json { "summary": "ASC 980-10 sets the overall scope and framework for accounting by entities with rate-regulated operations. Because regulators sometimes allow costs into rates in a period different from when an unregulated entity would expense them, the rate-making process can create assets (regulatory assets), reduce assets, or create liabilities; an incurred cost the regulator permits to be recovered in a future period is accounted for like a cost reimbursable under a cost-reimbursement-type contract (980-10-05-5, 05-6). The Topic applies only to operations meeting the three criteria in 980-10-15-2 and provides incremental industry guidance that overrides conflicting guidance elsewhere in the Codification.", "key_points": [ "The Topic applies to general-purpose external financial statements of operations meeting all three criteria in 980-10-15-2: rates are set or approved by an independent third-party regulator (or an empowered governing board), rates are designed to recover the specific entity's costs, and it is reasonable to assume cost-based rates can be charged to and collected from customers given demand and competition.", "Regulators' inclusion of costs in allowable costs in a period other than when an unregulated entity would expense them can create assets, reduce assets, or create liabilities for the regulated entity (980-10-05-5).", "An incurred cost for which a regulator permits recovery in a future period is accounted for like an incurred cost reimbursable under a cost-reimbursement-type contract (980-10-05-6).", "A regulatory accounting order not tied to rate treatment causes no economic effects and does not justify departing from general GAAP; the economic effect of regulatory decisions, not the mere existence of regulation, is the pervasive factor (980-10-05-7, 05-8).", "If only some of an entity's operations are regulated and meet the criteria, the Topic is applied only to that portion of the operations (980-10-15-4).", "Other Codification Topics still apply to regulated entities, but ASC 980 is applied instead of conflicting provisions—for example, capitalizing R&D costs meeting 980-340-25-1 despite Subtopic 730-10 (980-10-15-5).", "The Topic does not apply to emergency/inflation price controls, to an entity's regulatory (statutory) accounting records, or to contractual arrangements where the government or another party viewed as a regulator is a party to the contract and is the entity's principal customer (980-10-15-7)." ], "categories": [ "Industry-specific", "Recognition", "Subsequent measurement" ], "audience_level": "intermediate", "student_note": "Utilities and similar rate-regulated entities recognize regulatory assets and liabilities that would not exist under general GAAP; the common misunderstanding is thinking any regulatory accounting order justifies deferral—only rate actions with real economic effects (probable future recovery through rates) do.", "related_topics": [ "980-20", "980-340", "980-360", "980-405", "980-605", "730-10" ], "key_concepts": [ "rate-regulated operations", "allowable costs", "regulatory assets and liabilities", "cost-based rates", "cost-reimbursement-type contract analogy", "independent third-party regulator", "accounting orders", "scope criteria" ] } ``` Source downloaded (UTC): 2026-09-10T02:27:16.483Z to 2026-09-10T02:27:16.483Z Record version: sha256:976268c44c48dfbc3e176896b9f388cd782e05a8c2baef5c112549cc8d4f8911 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/980/10/#00-status) SEC content: no ##### [980-10-00-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:16.483Z to 2026-09-10T02:27:16.483Z Record version: sha256:d0c0fa3f6f05c3766d9179d594af9fd258ffe9b5fcb98f6c832390b9cdc9971b 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
980-10-05-1AmendedMaintenance Update 2016-05 (PDF)04/12/2016
980-10-05-1AmendedAccounting Standards Update No. 2014-0905/28/2014
980-10-15-6SupersededAccounting Standards Update No. 2014-1006/10/2014
Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:5d39a77954f64fe8849662139d0fff77d36d973927232070ae267c2de83dcee6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/980/10/#05-overview-and-background) SEC content: no ##### [980-10-05-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:dea998efa2438b0d89b7c368ed7f995bd0e557e8a3d271f9ed8ea3df01491059 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Regulated Operations Topic includes the following Subtopics: 1. a Overall 2. b Discontinuation of Rate-Regulated Accounting 3. c Accounting Changes and Error Corrections 4. d Other Assets and Deferred Costs 5. e Intangibles—Goodwill and Other 6. f Property, Plant, and Equipment 7. g Liabilities 8. h Asset Retirement and Environmental Obligations 9. i Contingencies 10. j Debt 11. k Revenue Recognition—Alternative Revenue Programs 12. l Compensation—General 13. m Compensation—Retirement Benefits 14. n Income Taxes 15. o Consolidation 16. oo Derivatives and Hedging 17. p Interest 18. q Leases. ##### [980-10-05-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:290d60c00ee67101d45433a8ebea9d30fd7772d0fd7dfd72af8179ffa4904bd7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Overall Subtopic provides guidance on the accounting and reporting for entities with regulated operations. #### Effect of Regulatory Accounting ##### [980-10-05-3](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:67f87048719ce7263db8766c68a10126821a7851e3f6c7dd57cb5939bf445028 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regulation of an entity's rates (also referred to as prices) is sometimes based on the entity's costs. Regulators use a variety of mechanisms to estimate a regulated entity's [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments."), and they allow the entity to charge rates that are intended to produce revenue approximately equal to those allowable costs. Specific costs that are allowable for rate-making purposes result in revenue approximately equal to the costs. ##### [980-10-05-4](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:6a9dace6da2450212630d4e946d47fa6d678d856ab5abc6d688ca37564360043 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In most cases, allowable costs are used as a means of estimating costs of the period during which the rates will be in effect, and there is no intent to permit recovery of specific prior costs. The process is a way of setting prices—the results of the process are reported in general-purpose financial statements in accordance with the same accounting principles that are used by unregulated entities. ##### [980-10-05-5](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:e10da34213499ac425ba99182d109d4cae58c41aa23af86c4279d74f3e6508c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regulators sometimes include costs in allowable costs in a period other than the period in which the costs would be charged to expense by an unregulated entity. For the regulated entity, that procedure can do any of the following: 1. a Create assets (future cash inflows that will result from the rate-making process) 2. b Reduce assets (reductions of future cash inflows that will result from the rate-making process) 3. c Create liabilities (future cash outflows that will result from the rate-making process). ##### [980-10-05-6](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:f473b35ef29749367b1b117f48f2b9fd4d641c71540fd9ce035427a9131e83aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For general-purpose financial reporting, an [incurred cost](https://asc.understandingaccounting.org/glossary/i/#incurred-cost "A cost arising from cash paid out or obligation to pay for an acquired asset or service, a loss from any cause that has been sustained and has been or must be paid for.") for which a regulator permits recovery in a future period is accounted for like an incurred cost that is reimbursable under a cost-reimbursement-type contract. ##### [980-10-05-7](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:742099fc06e3c5ea73b7b9519dfa40a87b3b57af6379632aec812d91698bad08 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting requirements that are not directly related to the economic effects of rate actions may be imposed on regulated businesses by orders of regulatory authorities and occasionally by court decisions or statutes. This does not necessarily mean that those accounting requirements conform with generally accepted accounting principles (GAAP). For example, a regulatory authority may order an entity to [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") and amortize a cost that would be charged to income currently by an unregulated entity. Unless capitalization of that cost is appropriate under this Topic, GAAP requires the regulated entity to charge the cost to current income. ##### [980-10-05-8](https://asc.understandingaccounting.org/asc/980/10/#980-10-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:20.595Z to 2026-09-10T02:27:20.595Z Record version: sha256:36c69ebba48b0402da396287c2fb16628e6a7f6f87638ed1fff6fc9ec71c027d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unless an accounting order indicates the way a cost will be handled for rate-making purposes, it causes no economic effects that would justify deviation from the GAAP applicable to business entities in general. The mere issuance of an accounting order not tied to rate treatment does not change an entity's economic resources or obligations. In other words, the economic effect of regulatory decisions—not the mere existence of regulation—is the pervasive factor that determines the application of GAAP. Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:eb4ef3e5a0051e6c25cd60858b34a8b5c34bec4ec2b8bd5b7908b7e32e09e4a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/980/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [980-10-15-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:cc586fb7c7692a3296d307dc64e2ab945080159d664260c309be0e20c5440598 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Subtopics within the Regulated Operations 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 Regulated Operations Subtopics. Entities within the scope of this Topic shall also comply with the applicable guidance not included in this Topic. #### Entities ##### [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:5b2386c508e4ecbf1bfabe9f489b66659e75d9687541ae95c08bd5a89e91fa95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Regulated Operations Topic applies to general-purpose external financial statements of an entity that has regulated operations that meet all of the following criteria: 1. a The entity's rates for regulated services or products provided to its customers are established by or are subject to approval by an independent, third-party regulator or by its own governing board empowered by statute or contract to establish rates that bind customers. 2. b The regulated rates are designed to recover the specific entity's costs of providing the regulated services or products. This criterion is intended to be applied to the substance of the regulation, rather than its form. If an entity's regulated rates are based on the costs of a group of entities and the entity is so large in relation to the group of entities that its costs are, in essence, the group's costs, the regulation would meet this criterion for that entity. 3. c In view of the demand for the regulated services or products and the level of competition, direct and indirect, it is reasonable to assume that rates set at levels that will recover the entity's costs can be charged to and collected from customers. This criterion requires consideration of anticipated changes in levels of demand or competition during the recovery period for any capitalized costs. This last criterion is not intended as a requirement that the entity earn a fair return on shareholders' investment under all conditions; an entity can earn less than a fair return for many reasons unrelated to the ability to bill and collect rates that will recover [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments."). For example, mild weather might reduce demand for energy utility services. In that case, rates that were expected to recover an entity's allowable costs might not do so. The resulting decreased earnings do not demonstrate an inability to charge and collect rates that would recover the entity's costs; rather, they demonstrate the uncertainty inherent in estimating weather conditions. This requirement must also be evaluated in light of the circumstances. For example, if the entity has an exclusive franchise to provide regulated services or products in an area and competition from other services or products is minimal, there is usually a reasonable expectation that it will continue to meet the other criteria. Exclusive franchises can be revoked, but they seldom are. If the entity has no exclusive franchise but has made the very large capital investment required to provide either the regulated services or products or an acceptable substitute, future competition also may be unlikely. ##### [980-10-15-3](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:72f511e29a2298c376f5c603cbf80b4aa82c4a304956a4bdff25e55e15335675 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases, the rates set by state regulatory agencies are accepted for Medicare and Medicaid reimbursement purposes. There is some disagreement about the extent to which such rates are based on a provider's costs. If regulatory agencies in those states base rates on the provider's costs and adopt a permanent system of regulation, health care providers in those jurisdictions could be subject to the provisions of this Topic. However, the criterion in (c) in the preceding paragraph also would have to be considered to determine whether this Topic applies to the entity. ##### [980-10-15-4](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:0c48fbd6538a3f2f43cc7474331ae2b182fa9096ab29a94658d2f41a963ddba2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If some of an entity's operations are regulated and meet the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2), this Topic shall be applied to only that portion of the entity's operations. ##### [980-10-15-5](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:a74378f2fc595b4384d2985b05f22842dfc6809b83aa40a9d0d55cfe9696df5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Guidance in other Codification Topics that applies to entities in general also applies to regulated entities. However, entities subject to this Topic shall apply it instead of any conflicting provisions of other parts of the Codification. For example, a regulator might authorize a regulated entity to incur a major research and development cost because the cost is expected to benefit future customers. The regulator might also direct that cost to be capitalized and amortized as an allowable cost over the period of expected benefit. If the criteria of paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1) are met, the entity shall [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") that cost even though Subtopic 730-10 requires such costs to be charged to income currently. That Subtopic shall still apply to accounting for other research and development costs of the regulated entity, as shall the disclosure requirements of that Subtopic. ##### [980-10-15-6](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:7ecade0e7054692d7e15e0a267130c559b8f68281cb3d601aa694b910067411b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-10](https://asc.understandingaccounting.org/updates/asu-2014-10/). #### Transactions ##### [980-10-15-7](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:24.100Z to 2026-09-10T02:27:24.100Z Record version: sha256:5ddfd648d624f8f4b3d2cf1e987f66e96966eedd62e60ddc5e9a970315e40c19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Regulated Operations Topic does not apply to any of the following transactions: 1. a Accounting for price controls that are imposed by governmental action in times of emergency, high inflation, or other unusual conditions, or accounting for contracts in general. However, if the terms of a contract between an entity and its customer are subject to regulation and the criteria of paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) are met with respect to that contract, the guidance in this Topic shall apply. 2. b An entity's regulatory accounting. Regulators may require regulated entities to maintain their accounts in a form that permits the regulator to obtain the information needed for regulatory purposes. This Topic neither limits a regulator's actions nor endorses them. Regulators' actions are based on many considerations. Accounting addresses the effects of those actions. This Topic merely specifies how the effects of different types of rate actions are reported in general-purpose financial statements. 3. c The criterion in paragraph [980-10-15-2(a)](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2) is intended to exclude contractual arrangements in which the government, or another party that could be viewed as a regulator, is a party to a contract and is the entity's principal customer. Source downloaded (UTC): 2026-09-10T02:27:33.762Z to 2026-09-10T02:27:33.762Z Record version: sha256:8c992cdbebdaef2e099f7051a75b97d30ffbbe07c201907f5fd52f664717d1fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/980/10/#sec-00-status) SEC content: yes ##### [980-10-S00-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:33.762Z to 2026-09-10T02:27:33.762Z Record version: sha256:69fa124fc9ee668f84b0955eab8d0705069ca71ec42a8bacb439e49fdc762b17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. No updates have been made to this subtopic. Source downloaded (UTC): 2026-09-10T02:27:36.246Z to 2026-09-10T02:27:36.246Z Record version: sha256:5bd80d9fce828ead4cad249e46998da3daa6bb31dc719ab58ab62c094eea5839 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-S45: SEC 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/980/10/#sec-45-other-presentation-matters) SEC content: yes #### Income Statement Presentation ##### [980-10-S45-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-S45-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:36.246Z to 2026-09-10T02:27:36.246Z Record version: sha256:46abc75a292f189970a8dab1017a9e0c3fa371a4b2999495fbc3e8242053997b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [220-10-S99-2](https://asc.understandingaccounting.org/asc/220/10/#220-10-S99-2), Regulation S-X Rule 5-03.1, for the income statement presentation requirements for a public utility company. #### Cost of Power Obtained Under Long-Term Purchase Contracts ##### [980-10-S45-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-S45-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:36.246Z to 2026-09-10T02:27:36.246Z Record version: sha256:a95aab37a9c6d1a1e45af428cc79dc36780ec4575d53aa378e918c460d05299f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [980-10-S99-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-S99-1), SAB Topic 10.D, for SEC Staff views on the presentation of cost of power obtained under long-term purchase contracts. Source downloaded (UTC): 2026-09-10T02:27:40.242Z to 2026-09-10T02:27:40.242Z Record version: sha256:121d2b629a60a511ea4131201e6e695cf114f89d03622e668b54106f90916416 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/980/10/#sec-50-disclosure) SEC content: yes #### Cost of Power Obtained Under Long-Term Purchase Contracts ##### [980-10-S50-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-S50-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:40.242Z to 2026-09-10T02:27:40.242Z Record version: sha256:84d93fd9a3590e9002a04424f51f993d5b7eadc00b282e309a543142468e7f80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [980-10-S99-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-S99-1), SAB Topic 10.D, for SEC Staff views on the disclosure requirements for cost of power obtained under long-term purchase contracts. Source downloaded (UTC): 2026-09-10T02:27:45.235Z to 2026-09-10T02:27:45.235Z Record version: sha256:4c0238cfa480586b95276cf26423187c1ab78bdedad87f1e22b4490e906c01aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 980-10-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/980/10/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [980-10-S99-1](https://asc.understandingaccounting.org/asc/980/10/#980-10-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:27:45.235Z to 2026-09-10T02:27:45.235Z Record version: sha256:7813988b674ef1c9527eb9c997d109440d4ad565e2a115662e6784c72c2b4b55 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 10.D, Long-Term Contracts for Purchase of Electric Power. - Facts: Under long-term contracts with public utility districts, cooperatives or other organizations, a utility company receives a portion of the output of a production plant constructed and financed by the district or cooperative. The utility has only a nominal or no investment at all in the plant but pays a proportionate part of the plant's costs, including debt service. The contract may be in the form of a sale of a generating plant and its immediate lease back. The utility is obligated to pay certain minimum amounts which cover debt service requirements whether or not the plant is operating. At the option of other parties to the contract and in accordance with a predetermined schedule, the utility's proportionate share of the output may be reduced. Separate agreements may exist for the transmission of power to the utility's system. FN2. - FN2 Registrants are reminded that the arrangement may contain a guarantee that is within the scope of Interpretation 45 \[Topic 460\]. Further, registrants should consider the guidance of Interpretation 46 \[Topic 810\]. Also, registrants would need to consider whether the arrangement contains a derivative that should be accounted for according to Statement 133 \[Topic 815\]. - Question: How should the cost of power obtained under long-term purchase contracts be reflected on the financial statements and what supplemental disclosures should be made in notes to the statements? - Interpretive Response: The cost of power obtained under long-term purchase contracts, including payments required to be made when a production plant is not operating, should be included in the operating expenses section of the income statement. A note to the financial statements should present information concerning the terms and significance of such contracts to the utility company including date of contract expiration, share of plant output being purchased, estimated annual cost, annual minimum debt service payment required and amount of related long-term debt or lease obligations outstanding. - Additional disclosure should be given if the contract provides, or is expected to provide, in excess of five percent of current or estimated future system capability. This additional disclosure may be in the form of separate financial statements of the vendor entity or inclusion of the amount of the obligation under the contract as a liability on the balance sheet with a corresponding amount as an asset representing the right to purchase power under the contract. - The note to the financial statements should disclose the allocable portion of interest included in charges under such contracts.