Wiley GAAP 2021, 2nd Edition

30ASC 440 COMMITMENTS

1. Perspective and Issues
   1. Subtopics
   2. Scope and Scope Exceptions
2. Definitions of Terms
3. Concepts, Rules, and Examples
   1. Unconditional Purchase Obligations
   2. Other Sources

PERSPECTIVE AND ISSUES

The FASB codification has three related Topics:

• ASC 440, Commitments,
• ASC 450, Contingencies, and
• ASC 460, Guarantees

Subtopics

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 entities and to all relevant transactions. (ASC 440‐10‐15‐1 through 15‐3) However, for guidance on product financing arrangements, the preparer should look to ASC 470‐40‐15 and repurchase agreements within the scope of ASC 606‐10‐55‐66 through 55‐78.

DEFINITIONS OF TERMS

Source: ASC 440‐10‐20. In addition to the terms listed below, see Appendix A for additional terms related to this topic: Contract, Lease, Lease ...