Wiley GAAP 2019

64ASC 900S SPECIALIZED INDUSTRY GAAP

CONTRACTORS—FEDERAL GOVERNMENT (ASC 912)¹

PERSPECTIVE AND ISSUES

ASC 912 governs the accounting and income recognition issues related to:

• Cost-plus-fixed-fee contracts
• Renegotiation (refunds of excessive profits)²
• Contracts terminated for the convenience of the government
• Fixed-price war and defense of supply contracts (ASC 912-10-15-3)

The fees under government cost-plus-fixed-fee contracts are recognized as income on the basis of partial performance if there is reasonable assurance of realization. Fees are also accrued as they become billable unless this accrual is not reasonably related to the proportionate performance of total work to be performed.

DEFINITIONS OF TERMS

Source: Terms are from ASC 912, Glossary.

Contract. A legal agreement obligating a contractor (referred to as the “general contractor” or “prime contractor”) to provide products or services to the U.S. government. The term also refers to subcontracts obligating subcontractors to indirectly perform in a similar manner under the supervision and control of the prime contractor.

Contractors. In the context of this discussion, contractors are enterprises that sell products or services to the U.S. government pursuant to a formal contract. The relationship to the government can be direct (a prime contract between the enterprise and the government) or indirect (a subcontract between the enterprise and a prime contractor).

Cost-plus-fixed-fee Contracts. A contract under ...