Close cycle · post-recognition
Stage 3 of 9 · Contract costs
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✓ ASC 340-40 · COSTS TO OBTAIN
Contract acquisition costs · $48,000 capitalized
Sales commission paid to the account executive on contract close. Per ASC 340-40-25-1, an entity shall recognize as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs. The $800 commission is incremental — it would not have been paid absent this contract closing.
Capitalized asset
$48,000
Closing AE commission · Section 3 of order form
Expected life
60 mo
36-mo term + 24-mo expected renewals
Monthly amortization
$800
/mo · $9,600/yr
Practical expedient
N/A
Period > 1 year · capitalization required
Capitalization criteria · ASC 340-40-25-1 to 25-3
✓ALL METCost is incremental
ASC 340-40-25-2 — would not have been incurred if contract had not been obtained
AE commission paid 1.6% of TCV on close; no commission if deal lost.
Expects to recover
ASC 340-40-25-1 — entity expects to recover the costs
Contract gross margin 78% over expected life · recovery far exceeds $48k commission.
Not in scope of other GAAP
ASC 340-40-25-5 — costs already in scope of inventory / fixed assets / intangibles excluded
Cash commission expense; not inventory or capitalized software.
Not amortizable in ≤ 1 year
ASC 340-40-25-4 — practical expedient to expense if amortization period ≤ 1 year
60-month expected life > 1 year. Expedient does not apply.
Amortization schedule · ASC 340-40-35-1 · straight-line over expected life
◇60 months| Year | Period | Months | Annual amort. | Carrying balance EOY |
|---|---|---|---|---|
| Year 1 | ✓INITIAL TERM | 12 | $9,600 | $38,400 |
| Year 2 | ✓INITIAL TERM | 12 | $9,600 | $28,800 |
| Year 3 | ✓INITIAL TERM | 12 | $9,600 | $19,200 |
| Year 4 | ◇EXPECTED RENEWAL | 12 | $9,600 | $9,600 |
| Year 5 | ◇EXPECTED RENEWAL | 12 | $9,600 | $0 |
| Total amortization | $48,000 | |||
Impairment test · ASC 340-40-35-3 to 35-6
✓NOT IMPAIREDASC 340-40-35-3: impair the asset if its carrying amount exceeds (a) the remaining consideration the entity expects to receive in exchange for the goods/services to which the asset relates, less (b) the costs that relate directly to providing those goods/services and have not been recognized as expenses.
Carrying balance (today):$48,000
Expected remaining consideration:$1,150,000
Direct costs to provide remaining services:$253,000
Recoverable amount:$897,000
Carrying ≤ recoverable?✓ YES — no impairment
Per ASC 340-40-35-5, impairment loss may be reversed up to original carrying amount if conditions improve — asymmetric vs fixed-asset impairment under ASC 360.
Disclosure outputs · ASC 340-40-50-1 to 50-3
Closing balance of capitalized contract costs (this contract)$48,000
Method of amortizationStraight-line over expected customer life
Amortization expense recognized in period$800 / month
Impairment loss recognized$0
Practical expedient elected (1-year)No · period > 1 year
Amortization period60 months · 5 years
Authority verified · PwC Viewpoint §11.2 · Deloitte DART §13.2 · ASC 340-40-25-1, 25-2, 25-3, 25-4, 35-1, 35-3, 35-4, 35-5, 50-1, 50-2, 50-3
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Disclosure pack
Investor-grade narrative · 7 ASC 606-10-50 sections
v3 · 11 reviewer edits
MD&A
Management narrative · auto-drafted from filings
5 auto-drafted · 1 human-input
Audit trail
Merkle proofs · Sigstore Rekor anchored · 7-yr retention
412 / 412 verified
Quality bar
12-question investor framework · disclosure self-test
5 pass · 7 partial · 0 gap
IR · earnings release
Press release narrative + analyst Q&A · locked with filing
6 sections · 10 Qs prepped