Page | 43
DISCLOSURE REQUIREMENTS
The standard requires entities to provide disclosures of assets recognized (capitalized costs) from
costs to obtain or fulfi ll a contract. (ASC 340-40-50-1)
The entity must disclose:
• Judgments made in determining the amount of costs incurred to obtain or fulfi ll a contract
with a customer.
• The method used to determine the amortization for each reporting period.
• The closing balances of assets recognized from the costs incurred to obtain or fulfi ll a
contract with a customer. Balances must be disclosed by main category of asset such as
costs to obtain contracts, precontract costs, and setup costs.
• The amount of amortization and any impairment losses recognized in the reporting period.
• The use of the practical expedient on the incremental costs of obtaining a contract.
POLICIES AND PROCEDURES TO IDENTIFY CAPITALIZED COSTS
The Company should establish a mechanism to accumulate all costs associated with a potential
contract (spreadsheet, separate g/l account, separate job #). Once a contract has been awarded, the
contract accountant (designated person from accounting) and the project manager should review the
costs incurred to determine if they meet the defi nition of one of the categories listed below. Once the
type of cost is determined, the determination is documented so that accounting can properly record in
the general ledger.
• Incremental costs to obtain a contact.
• Fulfi llment costs.
• Expenses.
Capitalized Costs to Obtain a Contract (continued)
>
