ASC 910
Active
ASC 910 – Contractors–Construction
Governs revenue and cost recognition for long-term construction contracts, including over-time methods and contract modifications.
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Conceptual Framework Linkage
Industry-specific elaboration on ASC 606's general over-time model
Long-term construction contracts have long posed a distinctive accounting challenge: performance often spans MULTIPLE reporting periods, with revenue recognition needing to track PROGRESS toward completion rather than waiting for a single delivery event. ASC 910 layers CONSTRUCTION-INDUSTRY-SPECIFIC guidance – on contract costs, combining/segmenting contracts, and loss provisions – ON TOP of ASC 606's general over-time revenue recognition model, rather than establishing a wholly separate revenue framework of its own.
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Scope
Contractors performing long-term construction-type contracts
ASC 910 applies to entities performing construction-type contracts – including general contractors, homebuilders performing contract construction, engineering and design firms, and specialty subcontractors – where performance typically spans an extended period.
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Contract Revenue Recognition – Over-Time via Input or Output Methods
The general ASC 606 over-time model, with construction-specific application guidance
Construction contracts commonly satisfy ASC 606's OVER-TIME recognition criteria (the customer typically controls the asset as it's created, or the contractor's performance creates an asset with no ALTERNATIVE USE and the contractor has an ENFORCEABLE right to payment for performance completed to date). Progress toward completion is measured using either an INPUT method (most commonly COST-TO-COST – costs incurred to date divided by total estimated contract costs) or an OUTPUT method (e.g. units delivered, surveys of work performed) – ASC 910 provides CONSTRUCTION-INDUSTRY-SPECIFIC guidance on applying these general ASC 606 methods.
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Contract Costs – What May Be Capitalised
Costs to fulfill vs costs to obtain a contract
Costs to FULFILL a contract – such as MOBILISATION costs (moving equipment/personnel to a job site) and UNINSTALLED MATERIALS delivered to a site but not yet incorporated into the project – may be CAPITALISED as contract assets (if they meet ASC 340-40's fulfillment cost criteria), rather than expensed as incurred, since they don't yet represent progress toward SATISFYING the performance obligation. Costs to OBTAIN a contract (e.g. sales commissions, bid/proposal costs) are separately evaluated under ASC 340-40's incremental cost of obtaining a contract guidance.
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Combining and Segmenting Contracts
Aligning the unit of account with economic substance
Multiple LEGALLY separate contracts entered into at or near the same time with the same customer may need to be COMBINED and accounted for as a single contract if they meet ASC 606's combination criteria (e.g. negotiated as a package with a single commercial objective, or consideration in one contract depends on the other). Conversely, a SINGLE contract covering genuinely distinct deliverables may be SEGMENTED into separate units of account if distinct performance obligations exist.
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Provision for Anticipated Losses on Contracts
The ENTIRE anticipated loss is recognised immediately, regardless of percentage complete
When TOTAL estimated contract costs exceed TOTAL estimated contract revenue (an anticipated LOSS on the contract as a whole), the ENTIRE expected loss is recognised IMMEDIATELY in the period the loss becomes evident – NOT spread proportionally over the remaining contract term, and REGARDLESS of how much progress has been made to date. This "ANTICIPATED LOSS" provision requirement supplements ASC 606's general revenue guidance and continues to apply even after the shift to ASC 606's control-transfer model.
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Contract Modifications, Claims, and Unpriced Change Orders
Variable consideration and enforceability judgement
Construction contracts often involve CHANGE ORDERS (modifications to scope/price) and CLAIMS (amounts a contractor seeks to collect from a customer beyond the agreed contract price, e.g. for customer-caused delays) – these are evaluated under ASC 606's variable consideration and contract modification framework, requiring judgement about whether the additional consideration is ENFORCEABLE and can be included in the transaction price without significant risk of future reversal.
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Worked Example – Cost-to-Cost Input Method Revenue Calculation
Measuring progress toward completion
Example: A $20,000,000 highway construction contract
A contractor has a $20,000,000 contract with total estimated costs of $16,000,000. By year-end, $6,400,000 of costs have been incurred.
Percentage complete = $6,400,000 ÷ $16,000,000 = 40%. Revenue recognised to date = 40% × $20,000,000 = $8,000,000. Gross profit recognised to date = $8,000,000 − $6,400,000 = $1,600,000, reflecting progress measured using the cost-to-cost input method.
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Worked Example – a Loss Contract Provision
Recognising the full loss immediately
Example: A contract whose total costs now exceed total revenue
A contractor's $10,000,000 fixed-price contract now has REVISED total estimated costs of $11,500,000 (up from an original estimate of $9,000,000, due to unexpected site conditions), with the contract 30% complete based on costs incurred to date ($3,450,000).
Total anticipated LOSS on the contract = $10,000,000 − $11,500,000 = $1,500,000 loss. Despite the contract being only 30% complete, the ENTIRE $1,500,000 anticipated loss must be recognised IMMEDIATELY in the current period – not spread over the remaining 70% of the contract.
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Disclosure Requirements
What ASC 910 requires (in addition to general ASC 606 disclosures)
Method used to measure progress toward completion for each type of contractBasis for classifying assets/liabilities as current in a classified balance sheet, given the length of contract cyclesDetails of revisions in contract estimates, including the effect of anticipated losses
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether multiple contracts should be combined, or a single contract segmentedEnforceability of claims and unpriced change orders for inclusion in the transaction price
SIGNIFICANT ESTIMATES
Total estimated contract costs, revised regularly as the contract progressesPercentage of completion under the cost-to-cost or other input/output methods
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ASC 910 vs IFRS – Comprehensive Comparison
Comparison – ASC 910 (with ASC 606) vs IFRS 15 for construction contracts
FeatureUS GAAP (ASC 910 / 606)IFRS (IFRS 15)
General revenue recognition modelOver-time, control-transfer basedSame – IAS 11 was superseded by IFRS 15, converging both frameworks on this same model
Progress measurement methodsInput (cost-to-cost) or output methodsSame input/output method categories – converged
Anticipated loss recognitionENTIRE anticipated loss recognised immediately (ASC 910 supplementary guidance)IAS 37's general ONEROUS CONTRACT model – provision at the LOWER of unavoidable costs and exit costs, a somewhat different measurement mechanic even though the practical outcome (recognising an expected loss) is broadly similar
The headline revenue recognition MODEL is now genuinely converged (both frameworks moved to a single control-transfer standard), but the SUPPLEMENTARY loss provision mechanics retain a real, if narrower, difference – ASC 910's immediate full-loss approach vs IAS 37's unavoidable-cost/exit-cost measurement basis for onerous contracts.
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Statement Mapping
Where every ASC 910 event lands
EventStatement(s) affectedNotes
Contract revenue recognised over timeBS ISRecognised as progress is made, per the cost-to-cost or other method
Anticipated loss provisionBS ISEntire loss recognised immediately upon becoming evident
Capitalised fulfillment costs (mobilisation, uninstalled materials)BSRecognised as a contract asset until incorporated into progress
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Related Topics
Cross-reference map
TopicConnection
ASC 606Supplies the general over-time revenue recognition model that ASC 910 elaborates on for construction contracts
ASC 340-40Supplies the framework for capitalising costs to fulfill and costs to obtain a contract
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Quick-Reference Glossary
Cost-to-cost method
An input method measuring progress toward completion as costs incurred to date divided by total estimated contract costs.
Anticipated loss provision
The requirement to recognise the entire estimated loss on a contract immediately, once total estimated costs exceed total estimated revenue.
Uninstalled materials
Materials delivered to a job site but not yet incorporated into the project, often excluded from progress measurement until installed.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows