cost of sales

This subtopic governs how a software vendor accounts for the costs of producing physical copies of software to be sold, leased, or otherwise marketed. Costs of duplicating the software, documentation, and training materials from the product masters and of physically packaging the product for distribution are capitalized as inventory on a unit-specific basis (330-985-25-1). Those capitalized costs are charged to cost of sales when revenue from the sale of the related units is recognized (330-985-40-1).

ASC 705-912 formerly contained cost-of-sales guidance for contractors with the federal government, addressing matters such as contract costs and related recognition and disclosure. Every paragraph in the subtopic (scope, recognition, and disclosure) was superseded by ASU 2014-09 (Revenue from Contracts with Customers). The subtopic is therefore an empty shell; federal government contractors now apply ASC 606 and the cost guidance in ASC 340-40.

This Subtopic governs how film production and distribution entities account for costs of manufacturing or duplicating products held for sale, such as videocassettes and digital video discs. Manufacturing/duplication costs are charged to expense on a unit-specific basis when the related product revenue is recognized (705-926-25-1). The cost of theatrical film prints is instead expensed over the period benefited (705-926-25-2).

ASC 705-976 addresses the measurement of costs related to retail land sales, using the same scope as the Real Estate—Retail Land Overall Subtopic (976-10-15). Its substantive initial measurement guidance was superseded by ASU 2014-09, so the Subtopic now simply directs preparers to Subtopic 340-40 for incremental costs of obtaining a contract with a customer and costs to fulfill a contract.

ASC 705-985 is a "links only" subtopic that points to the authoritative guidance elsewhere in the Codification on cost of sales and services for computer software. Its content is that amortization of capitalized software development costs for products marketed to others is charged to cost of sales or a similar expense category (per 985-20-45-1), while duplication/packaging costs are inventory costs under 985-330 and costs to keep software current with hardware revisions are addressed in 985-20-55-11 through 55-12.