FASB ASC 340 Accounting for Other Assets and Deferred Costs

FASB ASC Guide > FASB ASC 340 The Financial Accounting Standards Board ( FASB) released Accounting Standards Codification 340 (ASC 340) to address other assets, such as prepaid e penses, and deferred costs! The "ain su#topics included in this area are as follo$s%

The capitali&ation of ad'ertising costs (nsurance Contracts that )o *ot Transfer (nsurance +is, Capitali&ed Bond (ssuance Costs - these are preferred to #e a"orti&ed using the effecti'e interest "ethod ho$e'er straight line is accepta#le too Certain long li'ed assets

.hen discussing prepaid e penses, the/ discuss the definition of $hat a prepaid is and that it includes things such as insurance, interest, rents, ta es, unused ro/alties, paid ad'ertising not recei'ed, and operating supplies! The topic ASC 300 discusses the finer points of ho$ to account for each of the different t/pes of prepaid e penses and deferred costs and ho$ to properl/ account for the" gi'en the certain circu"stances that each of the" present! Capitalizing Pre-production Costs per ASC 340-10- ! The FASB created certain rules regarding the accounting treat"ent for creating assets such as dies and "olds for products that a co"pan/ $ill sell o'er the course of ti"e to custo"ers! For e a"ple, the costs related to the design and de'elop"ent of the end product "ust #e e pensed as incurred! )esigning the actual dies and tools to "a,e the product are to #e capitali&ed as part of the e1uip"ent used to "a,e it, assu"ing the designer retains o$nership of the tools! (f these ite"s are not o$ned #/ the "a,er, then the/ should #e e pensed as incurred, unless there is a #inding contract $ith the custo"er that states $hat costs are to #e rei"#ursa#le! Direct "esponse Ad#ertising per ASC 340- 0 Those costs $hich are considered to #e direct response ad'ertising 1ualif/ for capitali&ation, $hich is an e ception to the nor"al treat"ent of ad'ertising $hich re1uires e pensing the costs in the period incurred! $nsurance Deposits per ASC 340-30 This is applica#le to co"panies that ha'e #usiness in insurance! Specificall/, these co"panies $ould engage in insurance or reinsurance arrange"ents that don2t transfer ris,, or one $here the ris, is not a#le to #e "easured! Because the ris,s are not transferred, an asset or lia#ilit/ should #e #oo,ed at the ti"e of inception! Su#se1uent

"easure"ent is calculated #ased on /ield of pre'ious and future pa/"ents, and is consistent $ith the "ethodolog/ descri#ed in ASC 300! Chec, out "ore high le'el e planations of the FASB ASC in our Guide to the Accounting Standards Codification3