- US GAAP
ASC 340 comprises four Subtopics (Overall, Capitalized Advertising Costs, Insurance Contracts that Do Not Transfer Insurance Risk, and Other Assets and Deferred Costs — Contracts With Customers). Below is an overview of each Subtopic.
ASC 340-10 notes the following:
The Overall Subtopic addresses the accounting and reporting for certain deferred costs and prepaid expenses. The guidance in this Subtopic is limited to a discussion of the nature of prepaid expenses and preproduction costs related to long-term supply arrangements. The specific guidance for many other costs that have been deferred is included in various other financial, broad, and industry Topics.
ASC 340-20 provides guidance on capitalized advertising costs and notes the following:
Specifically, for direct-response advertising that may result in reported assets, this Subtopic provides guidance on:
- How such assets shall be measured initially
- How the amounts ascribed to such assets shall be amortized
- How the realizability of such assets shall be assessed
- The financial statement disclosures that shall be made about advertising.
ASC 340-30 notes the following in regards to the guidance in this Subtopic:
This Subtopic provides guidance on how to apply the deposit method of accounting when it is required for insurance and reinsurance contracts that do not transfer insurance risk. These contracts may be prospective or retroactive in nature.
The transfer of insurance risk requires transferring both timing risk and underwriting risk. Therefore, four possible categories for deposit arrangements have been identified as follows:
- An insurance or reinsurance contract that transfers only significant timing risk.
- An insurance or reinsurance contract that transfers only significant underwriting risk.
- An insurance or reinsurance contract that transfers neither significant timing nor significant underwriting risk.
- An insurance or reinsurance contract with an indeterminate risk.
ASC 340-40 was added by ASU 2014-09, Revenue From Contracts With Customers, which is not effective until fiscal years beginning after December 15, 2017 (see ASC 606, Revenue From Contracts With Customers, for the full effective date information). ASC 340-40 notes the following in regards to the guidance in this Subtopic:
This Subtopic provides accounting guidance for the following costs related to a contract with a customer within the scope of Topic 606 on revenue from contracts with customers:
- Incremental costs of obtaining a contract with a customer
- Costs incurred in fulfilling a contract with a customer that are not in the scope of another Topic.