Wiley Practitioner's Guide to GAAP 2022

30ASC 440 COMMITMENTS

• Perspective and Issues
  • Subtopics
  • Scope and Scope Exceptions
• Definitions of Terms
• Concepts, Rules, and Examples
  • Unconditional Purchase Obligation
  • 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 Obligation

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, Definitions of Terms, for additional terms related to this topic: Contract, ...