ASC 340

ASC 340 refers to the Accounting Standards Codification (ASC) Topic 340, which addresses Other Assets and Deferred Costs. ASC 340 provides guidance on the recognition, measurement, and presentation of certain costs and assets that are not specifically addressed in other accounting standards.

What is ASC 340?

ASC 340 offers instructions regarding how to account for different assets and deferred costs that don't fit into specific GAAP categories. These include deferred costs such as prepaid expenses and specific advertising expenses, as well as other assets like nonrefundable fees and initial direct costs of operating leases. The standard covers how to capitalize, amortize, and handle impairments of these assets and deferred costs.

What type of costs are evaluated for capitalization under ASC 340?

Common types of costs that are often evaluated for capitalization under ASC 340 include:

• Prepaid expenses: Costs incurred in advance of receiving the related goods or services, such as prepaid insurance premiums or prepaid rent.
• Direct response advertising costs: Costs associated with advertising campaigns that are expected to result in future revenue, such as advertising production costs and media placement expenses for direct-response advertising.
• Initial direct costs of operating leases: Costs incurred by the lessor in negotiating and securing an operating lease, such as legal fees, commissions, and other direct costs directly attributable to the lease arrangement.
• Other deferred costs: Various other costs that are deferred and expected to generate future economic benefits, such as costs associated with contract acquisition or fulfillment that are not covered by other accounting standards.