substance over form

This Subtopic governs how oil and gas entities account for certain "conveyance" transactions that are, in substance, borrowings repayable in cash or its equivalent. Under 470-932-25-1, such arrangements must be recorded as a payable by the operator receiving the funds and a receivable by the party advancing the funds, rather than as a sale or conveyance of mineral interests.

ASC 505-20 governs how corporations (issuers) and shareholders (recipients) account for stock dividends and stock splits. The core rule is substance over form: a small issuance (generally less than 20–25% of previously outstanding shares) is a stock dividend requiring capitalization of retained earnings at the fair value of the shares issued, while a larger issuance that materially reduces the unit market price is a stock split in substance, requiring capitalization only to the extent of legal requirements. Recipients recognize no income; they simply reallocate the cost of previously held shares over the larger number of shares.

ASC 730-10 governs the identification and accounting for research and development (R&D) costs. The core rule is that R&D costs within scope are charged to expense when incurred (730-10-25-1), because future benefits are too uncertain and unmeasurable to support asset recognition (730-10-05-2 through 05-3). The subtopic also defines which activities count as R&D, which cost elements are R&D costs, and requires disclosure of total R&D expense for each income statement period.

ASC 730-20 governs how an entity accounts for arrangements in which other parties (often a limited partnership of investors) fund the entity's research and development. The central question is the substance of the entity's obligation: whether the entity has merely contracted to perform R&D services for others, or has in substance incurred a liability to repay the funding parties. Substance governs over form, so payments labeled royalties or option/purchase prices may in fact be settlement of a borrowing, the purchase price of an asset, or true royalties.

This subtopic tells government contractors how to account for best-efforts-basis, research-and-development-cost-sharing arrangements with the federal government. When all six scope conditions in 730-912-15-2 are met (qualifying R&D, contractor retains rights to data/results, best-efforts-only obligation, mutual expectation that costs will exceed funding, no contract combination under 606-10-25-9, and the federal government as sole or principal ultimate customer), the arrangement is not a revenue contract under Topic 606. Instead, costs are expensed as R&D as incurred under Topic 730, and customer funding is recorded as an offset to aggregate R&D expense rather than as contract revenue (730-912-25-1).

ASC 730-985 is a "link" subtopic: it contains no substantive rules of its own but points readers from the research and development Topic to the software guidance. It directs users to 985-20-25-1 for costs incurred to establish the technological feasibility of software to be sold, leased, or otherwise marketed, and to 985-20-25-8 through 25-10 for the cost of purchased software to be marketed.