- US GAAP
ASC 405 comprises four Subtopics (Overall, Extinguishments of Liabilities, Insurance-Related Assessments, and Obligations Resulting from Joint and Several Liability Arrangements). Below is an overview of each Subtopic.
This Subtopic provides information on where in the Codification specific guidance is provided for accounting for various types of liabilities.
ASC 405-20 notes the following:
An entity may settle a liability by transferring assets to the creditor or otherwise obtaining an unconditional release. Alternatively, an entity may enter into other arrangements designed to set aside assets dedicated to eventually settling a liability. Accounting for those arrangements has raised issues about when a liability should be considered extinguished. This Subtopic establishes standards for resolving those issues.
ASC 405-30 notes the following:
Insurance entities as well as noninsurance entities are subject to a variety of assessments related to insurance activities, including those by state guaranty funds and workers' compensation second-injury funds. Some entities may be subject to insurance-related assessments because they self-insure against loss or liability. This Subtopic provides guidance on accounting for insurance-related assessments.
ASC 405-40 was added by ASU 2013-04, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 (for nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter). ASC 405-40 "addresses the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements."