ASC 440, Commitments, contains only one subtopic:

  • ASC 440-10, Overall, which provides general guidance on financial accounting and reporting for certain commitments.

The subtopic has two subsections:

  1. General
  2. Unconditional Purchase Obligations

The General subsection provides guidance for:

  • Unused letters of credit,
  • Preferred stock dividends in arrears,
  • Commitments such as those for plant acquisitions, and
  • Obligations to reduce debts, maintain working capital, or restrict dividends.
  • (ASC 440-10-05-2)

The Unconditional Purchase Obligation subsection provides guidance for unconditional purchase obligations, such as throughput and take-or-pay contracts. (ASC 440-10-05-3)

Scope and Scope Exceptions

ASC 440 applies to all transactions. However, for guidance on product financing arrangements, the preparer should look to ASC 470-40-15. Upon implementation of ASU 2014-09, guidance on repurchase agreements within the scope of ASC 606 can be found in ASC 606-10-55-66 through 55-78. (ASC 440-10-15-4)


All significant contractual commitments must be disclosed in the notes to the financial statements. For example, lease contract provisions, pension obligations, requirements contracts, bond indenture covenants, commitments to purchase or construct new facilities, and employee share-based compensation plans should be clearly disclosed in the notes.


Source: ASC 440-10-20. In addition to the terms ...

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