start-up and organization costs

Expenses27

1. 720-10Overall720 Other Expenses

   ASC 720-10 is the Overall subtopic of the Other Expenses Topic, which is essentially an organizing shell. It lists the eight subtopics housed under Topic 720 — Overall, Start-Up Costs, Insurance Costs, Contributions Made, Real and Personal Property Taxes, Advertising Costs, Electronic Equipment Waste Obligations, and Business and Technology Reengineering — and states that each contains standalone guidance with no interrelationship among them.

2. 720-15Start-Up Costs720 Other Expenses

   ASC 720-15 governs the accounting for start-up activities — including one-time activities to open a new facility, introduce a new product or service, conduct business in a new territory or with a new class of customer, initiate a new process in an existing facility, or organize a new entity (organization costs). The single core rule is that costs of start-up activities, including organization costs, must be expensed as incurred (720-15-25-1). The Subtopic defines start-up activities by their nature rather than by the time period in which they occur, and carves out numerous costs governed by other GAAP.

3. 720-20Insurance Costs720 Other Expenses

   ASC 720-20 tells a policyholder (a noninsurance entity, or an insurer buying coverage outside its core operations) how to account for insurance it purchases, covering three contract types: retroactive contracts, claims-made contracts, and multiple-year retrospectively rated contracts. If a contract does not actually transfer insurance risk, the premium (less amounts retained by the insurer) is accounted for as a deposit under Subtopic 340-30 (720-20-25-1). For retroactive coverage of already-incurred liabilities, the premium is expensed immediately, a receivable is recorded for expected recoveries, and any excess of receivable over premium is a deferred gain amortized over the recovery period (720-20-25-3 through 25-4; 720-20-35-2).

4. 720-25Contributions Made720 Other Expenses

   ASC 720-25 governs how a resource provider (any entity) accounts for contributions it makes, including unconditional promises to give. Contributions made are recognized as expenses in the period made, with a corresponding decrease in assets or increase in liabilities, and are measured at the fair value of the assets given (or of the donee liabilities cancelled). Conditional promises are not recognized until the barrier is overcome, using the same conditionality analysis as the contributions received guidance in 958-605.

5. 720-30Real and Personal Property Taxes720 Other Expenses

   ASC 720-30 governs when an accrual-basis taxpayer records a liability for real and personal property taxes and how much is charged to income in each period. Legal liability for such taxes generally attaches at a specific event date (assessment date, lien date, levy date, etc.) determined by state law, but the preferred accounting is a monthly accrual over the fiscal period of the taxing authority for which the taxes are levied. Accrued property taxes are current liabilities, and later revisions of estimated amounts run through the income statement.

6. 720-35Advertising Costs720 Other Expenses

   ASC 720-35 governs how entities account for advertising costs in annual financial statements. The core rule: advertising costs are expensed either as incurred or the first time the advertising takes place, applied consistently as an accounting policy to similar kinds of advertising activities (720-35-25-1); no advertising asset is capitalized, though sales materials may be treated as prepaid supplies and cooperative-advertising obligations must be accrued when the related revenue is recognized. The notes must disclose the policy elected and total advertising expense for each income statement presented (720-35-50-1).

7. 720-40Electronic Equipment Waste Obligations720 Other Expenses

   ASC 720-40 addresses when a producer must recognize a liability and expense for the cost of disposing of "historical waste" electrical and electronic equipment held by private households under EU Directive 2002/96/EC (WEEE). Because the Directive funds historical household waste collectively by producers selling in the market during a country-defined measurement period, the obligating event is participation in that market — so no liability may be recognized before the measurement period begins, regardless of how much qualifying equipment the producer previously sold (720-40-25-1). The liability is accrued over the measurement period based on estimated total program costs and the producer's estimated market share, and is adjusted as actual data arrives (720-40-25-3; 720-40-35-1).

8. 720-45Business and Technology Reengineering720 Other Expenses

   ASC 720-45 governs the accounting for costs of business process reengineering (BPR) activities, including those bundled into information technology transformation projects (e.g., enterprise software installations). The core rule is that BPR costs—whether performed internally or by third parties—must be expensed as incurred, even when they are part of a project to acquire, develop, or implement internal-use software. When a bundled third-party consulting contract covers multiple activities, the contract price must be allocated among activities based on objective evidence of relative fair values.

9. 720-50Fees Paid to the Federal Government by Pharmaceutical Manufacturers and Health Insurers720 Other Expenses

   ASC 720-50 governs how pharmaceutical manufacturers and health insurers account for the annual, non-tax-deductible fees payable to the U.S. Treasury under the Affordable Care Act (as amended by the Health Care and Education Reconciliation Act). The entire estimated annual fee liability is recognized in full upon the first qualifying event in the calendar year (first branded prescription drug sale, or first provision of U.S. health risk insurance), with an offsetting deferred cost amortized to expense — normally straight-line — over that calendar year. The fee is presented as an operating expense.

10. 720-908Airlines720 Other Expenses

    ASC 720-908 governs how airlines account for route developmental costs, preoperating costs, and certain maintenance/overhaul costs. The core rule is expense-as-incurred: because route expansion is a normal, recurring activity in a deregulated environment with uncertain recoverability, these costs may not be capitalized. It also addresses the direct expensing method for overhauls and the cost of repairing rotables.

11. 720-922Entertainment—Cable Television720 Other Expenses

    This Subtopic tells cable television entities which industry-specific costs must be expensed rather than capitalized. During the prematurity period (while a cable system is being built out and partially marketed), subscriber-related costs and general and administrative expenses are period costs. Costs of disconnecting/reconnecting subscribers after initial installation, and costs of unsuccessful franchise applications or abandoned franchises, are also charged to expense.

12. 720-924Entertainment—Casinos720 Other Expenses

    This Subtopic governs how a casino entity accounts for the cost of promotional allowances — complimentary goods and services (comps) such as rooms, food, beverages, and entertainment given to customers. Its single substantive rule is that the cost of providing those promotional allowances is included in costs and expenses (720-924-25-1). Scope follows the casino Overall Subtopic, Section 924-10-15.

13. 720-926Entertainment—Films720 Other Expenses

    This Subtopic governs how film production and distribution entities account for certain costs incurred to develop and market a film, including overall deal costs and exploitation costs. Costs of overall deals that cannot be identified with specific projects are charged to expense as incurred over the related time period (720-926-25-1), advertising costs follow Subtopic 720-35 (720-926-25-2), and all other exploitation costs, including marketing costs, are expensed as incurred (720-926-25-3).

14. 720-928Entertainment—Music720 Other Expenses

    This Subtopic tells music-industry entities when to expense artist royalties, record master production costs, advance minimum guarantees paid by licensees, and other license fees. The core rule is that artist royalties (adjusted for anticipated returns) are charged to expense in the period the record sale occurs, advances are expensed as royalties are subsequently earned, and any advance or minimum guarantee that appears unrecoverable is expensed when the loss becomes evident (720-928-25-1, 720-928-25-3).

15. 720-932Extractive Activities—Oil and Gas720 Other Expenses

    This Subtopic identifies costs unique to oil- and gas-producing activities that do not result in acquisition of an asset and therefore must be charged to expense as incurred. Under the successful efforts framework, geological and geophysical (G&G) costs, costs of carrying and retaining undeveloped properties, dry hole and bottom hole contributions, and the costs of exploratory wells (and exploratory-type stratigraphic test wells) that do not find proved reserves are expensed immediately. It also notes the customary practice of accumulating an in-house exploration department's costs and allocating them to exploration activities using standardized charges.

16. 720-940Financial Services—Brokers and Dealers720 Other Expenses

    This short subtopic addresses how brokers and dealers in securities account for mutual fund distribution costs. Its only substantive instruction is a cross-reference: for 12b-1 fees and contingent deferred sales charges, apply the cost guidance in Subtopic 946-720 (Investment Companies—Other Expenses). Its scope follows the broker-dealer Overall Subtopic scope in Section 940-10-15.

17. 720-942Financial Services—Depository and Lending720 Other Expenses

    This Subtopic governs how depository institutions account for assessments imposed by the Financing Corporation (FICO) under the Deposit Insurance Funds Act of 1996, which requires institutions with deposits assessable by the Deposit Insurance Fund to help finance outstanding FICO bonds. The single rule is that the FICO assessment is reported as a period cost as incurred (720-942-25-1) rather than capitalized or accrued for future periods.

18. 720-944Financial Services—Insurance720 Other Expenses

    ASC 944-720 tells insurance entities which costs must be expensed as incurred rather than capitalized as deferred acquisition costs. Because 944-30-25-1A permits capitalization only of incremental direct acquisition costs relating to successful contract acquisitions or renewals, everything else — non-qualifying acquisition-related costs and all indirect costs — is charged to expense as incurred (944-720-25-2).

19. 720-946Financial Services—Investment Companies720 Other Expenses

    This Subtopic tells investment advisers and mutual fund distributors how to account for costs incurred to distribute fund shares. The general rule: if the adviser does not receive both 12b-1 fees and contingent-deferred sales fees, the distribution/offering costs fail the definition of an asset and must be expensed as incurred (with initial offering costs treated as start-up costs under Subtopic 720-15). Distributors of no-front-end-load mutual funds instead defer and amortize incremental direct costs and expense indirect costs as incurred.

20. 720-948Financial Services—Mortgage Banking720 Other Expenses

    This Subtopic governs how a mortgage banking enterprise accounts for fees it pays to permanent investors to assure the ultimate sale of residential or commercial loans. Such commitment fees are expensed when the loans are actually sold to the permanent investor, or earlier if it becomes evident the commitment will not be used. Because residential commitments typically cover blocks of loans, the fee is allocated to individual loan transactions on the ratio of the individual loan amount to the total commitment amount.

21. 720-952Franchisors720 Other Expenses

    ASC 720-952 was the franchisor-specific guidance on other expenses (franchise costs such as direct and indirect costs of franchise sales and continuing franchise services). Every paragraph in the subtopic has been superseded — the recognition, presentation and other guidance by Maintenance Update 2017-09 and the disclosure paragraph by ASU 2014-09 (Revenue from Contracts with Customers). As a result, the subtopic contains no operative guidance today; franchisor cost accounting is addressed under ASC 606 and ASC 340-40.

22. 720-954Health Care Entities720 Other Expenses

    ASC 720-954 governs how health care entities account for insurance-related and other operating expenses, principally retrospectively rated insurance policies, claims-made policies, malpractice loss accruals, multiprovider captive insurance arrangements, and stop-loss insurance. The core rules turn on whose loss experience drives the premium: if the entity's own experience, the minimum premium is expensed over the coverage period and recoveries are deferred until estimated losses exceed the stipulated maximum premium; if a group's experience, additional premiums or refunds are accrued based on group experience to date, including asserted and unasserted, reported and unreported claims.

23. 720-958Not-for-Profit Entities720 Other Expenses

    ASC 720-958 (cross-referenced as 958-720) governs how not-for-profit entities report expenses: by functional classification (program services and supporting activities such as management and general, fundraising, and membership development) and by natural classification, with a required analysis linking the two. It also sets the purpose/audience/content criteria that must all be met before joint costs of an activity that includes fundraising may be allocated to program or management and general rather than charged entirely to fundraising, and requires a recipient NFP to recognize services received from personnel of an affiliate that the affiliate does not charge for.

24. 720-970Real Estate—General720 Other Expenses

    ASC 720-970 addresses when real estate project costs must be expensed rather than capitalized. Its core rules: internal costs of preacquisition activities for a property that will be an operating property at acquisition date are expensed as incurred (720-970-25-1), and indirect costs not clearly related to projects under development or construction — including general and administrative expenses — are charged to expense as incurred (720-970-25-3). The Subtopic defines "operating" property as one where major construction is substantially complete and the property is either available for occupancy upon tenant improvements or already income-producing (720-970-25-2).

25. 720-972Real Estate—Common Interest Realty Associations720 Other Expenses

    This Subtopic tells common interest realty associations (CIRAs) — such as condominium and homeowners' associations — how to account for expenditures on major repairs or replacements of common property. Under 720-972-25-1, a CIRA that uses fund accounting charges such expenditures to the fund(s) established for major repairs and replacements; if the expenditure relates to common property that has been recognized as an asset, the amount is instead reported as a transfer to the operating fund (or property fund, if one exists).

26. 720-974Real Estate—Real Estate Investment Trusts720 Other Expenses

    This subtopic governs how a real estate investment trust (REIT) accounts for "operating support" received from its external adviser — arrangements designed to guarantee the REIT a certain return, such as buying loans or property above fair value, debt forgiveness, advisory fee reductions, compensating balances, or cash payments. The REIT must adjust any transferred assets or liabilities to fair value at the transaction date and recognize the support effectively obtained as income or as a reduction of advisory fees. The effect of these transactions must be reported separately in the income statement and fully disclosed as a related party relationship.

27. 720-978Real Estate—Time-Sharing Activities720 Other Expenses

    This subtopic governs how a time-share seller accounts for other expenses of time-sharing activities — chiefly selling and marketing costs and subsidies of the owners association. The core rule is that all costs incurred to sell time-sharing intervals are expensed as incurred unless they qualify for capitalization as costs to obtain a contract under ASC 340-40-25-1 through 25-4, and seller payments of dues, maintenance fees, or subsidies of owners association losses are likewise expensed as incurred.