wanderbooks/docs/spec/sources/fasb-asc.md

# FASB Accounting Standards Codification: paragraphs read directly

Read 2026-10-14 in the ASC's basic view (asc.fasb.org, the owner's login),
except the ASC 230 section added 2026-10-20, which says where it was read.
The Codification is copyrighted by the Financial Accounting Foundation,
so this file keeps only short quotes and paraphrase, with the paragraph
numbers to look up. Earlier ASC paragraphs were read through Deloitte's
DART roadmaps (see README).

## 360-10-35-4 (Property, plant, and equipment: depreciation)

A productive facility's cost is spread over its expected useful life,
allocated "as equitably as possible" to the periods that get its
services. Depreciation distributes cost, "less salvage (if any)", over
the estimated useful life "in a systematic and rational manner"; it is
"a process of allocation, not of valuation." No method is prescribed.
→ B-15: straight line, salvage never depreciated, partial months by
days (each day of service bears the same cost) is one systematic and
rational allocation.

## 340-10-05-2, -05-4, -05-5 (Other assets and deferred costs: prepaids)

Prepaid expenses are assets "typically used up or expire within the
normal operating cycle," paid "in advance of their use or consumption"
(05-4); examples include insurance, interest, rents, taxes, and
advertising not yet received (05-5). The Subtopic covers only their
nature (05-2): it prescribes no expensing method.
→ B-16: a prepaid is an asset, expensed over the months it covers
(a convention; the ASC is silent on the method).

## 210-10-45-1, -45-2, -45-5 (Balance sheet: current assets and liabilities)

Prepaid expenses are among current assets (45-1(g)), not because they
become cash but because they would otherwise use current assets in the
operating cycle (45-2). A total of current liabilities "shall be
presented in classified balance sheets" (45-5): the rule applies when a
balance sheet is classified.
→ wanderbooks' balance sheet is unclassified (by element), which this
Subtopic permits; a classified layout would need current/noncurrent
account roles.

## 230-10-45-7, -10, -12(a), -13(a), -14(b), -15(b) (Statement of cash flows)

Gross amounts are "more relevant" than net (45-7). Cash receipts and
payments are classified "as resulting from investing, financing, or
operating activities" (45-10). Collections on, and disbursements for,
loans the entity makes are investing (45-12(a), 45-13(a)). Proceeds of
"other short- or long-term borrowing" are financing inflows (45-14(b));
"repayments of amounts borrowed" are financing outflows (45-15(b)).
→ B-14: money owners advance (Due to Shareholders) is borrowing, so
financing, gross; a loan the company makes is investing, gross.

## ASC 230 for the direct method (rules.md B-14, P3 defect 1)

Read 2026-10-20, not in the ASC basic view: DART's Codification pages
need a login, and its public Roadmap on the statement of cash flows
quotes only some of these paragraphs. So they were read where public
sources reproduce the Codification's text: EY's Financial reporting
developments guide "Statement of cash flows" (July 2026,
https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/technical/accountinglink/documents/ey-frd42856-07-29-2026.pdf,
which quotes ASC 230 and 830-230 in full; page numbers its own), the
FASB's ASUs that last amended them (ASU 2016-15,
https://storage.fasb.org/ASU%202016-15.pdf; ASU 2016-18,
https://storage.fasb.org/ASU%202016-18.pdf), and Deloitte's public DART
Roadmap where it quotes them
(https://dart.deloitte.com/USDART/home/codification/presentation/asc230-10/roadmap-statement-cash-flow,
no trailing slash: with one the page is "Tree node not found").
Quotes are short; the rest is paraphrase.

- **230-10-10-1** (EY p. 1): the statement's primary objective is "to
  provide relevant information about the cash receipts and cash payments
  of an entity during a period." → B-14 rule 1.
- **230-10-45-1** (EY p. 1): the statement "shall report the cash effects
  during a period of an entity's operations, its investing transactions,
  and its financing transactions." (It says nothing of reconciling
  beginning and ending cash: that is 45-24.)
- **230-10-45-4** (EY p. 5): the statement explains the change in the
  total of cash, cash equivalents and restricted cash. ASU 2016-18 struck
  its old sentence on the totals at the beginning and end of the period
  (gone from the current text). → rule 1: the cash accounts are all of
  them. (50-7 and 50-8, EY pp. 5-6, 30: the nature of restrictions, and
  the balance-sheet lines that hold the total when there are several.)
- **230-10-45-5** (EY p. 5): purchases and sales of cash equivalents are
  cash management, and transfers among cash, cash equivalents and
  restricted cash "are not reported as cash flow activities". → rule 1: a
  transfer between two cash accounts is no flow.
- **230-10-45-12(c)** (EY p. 41; ASU 2016-15 p. 25): investing inflows
  include "Receipts from sales of property, plant, and equipment and other
  productive assets". → rule 4.
- **230-10-45-13(c)** (EY p. 41; ASU 2016-15 p. 12): investing outflows
  include payments "at the time of purchase or soon before or after
  purchase" for PP&E; generally only those are investing, and incurring
  debt directly to the seller is a financing transaction whose later
  principal payments are financing. → rule 12 (the bill split), and the
  limit B-14 records.
- **230-10-45-14(a)** (EY p. 42): financing inflows include "Proceeds from
  issuing equity instruments". **45-15(a)**: financing outflows include
  "Payments of dividends or other distributions to owners"; **45-15(c)**:
  most principal payments on seller-financed debt for PP&E are financing.
  (45-14(b) and 45-15(b): above, read directly.)
- **230-10-45-16(a), (b)** (EY p. 43): operating inflows include "Cash
  receipts from sales of goods or services", including collections of
  receivables from customers arising from those sales; and interest and
  dividends received. 45-16(c): all other operating receipts. → rule 5,
  rule 4's exception.
- **230-10-45-17** (EY pp. 43-44): operating outflows: payments for goods
  for resale (a), to "other suppliers and employees" (b), to governments
  for taxes, duties, fines and other fees (c), interest to lenders and
  other creditors (d), and others ((e), (ee), (f)). (Income taxes fall
  under (c); 45-25 names them a class.)
- **230-10-45-8, 45-9** (EY p. 12): only items whose "turnover is quick,
  the amounts are large, and the maturities are short" (original maturity
  "three months or less"; amounts due on demand count) may be reported
  net, and even then need not be. **230-10-45-26** (EY p. 13): otherwise
  investing and financing inflows and outflows are reported separately,
  "proceeds of borrowings ... separately from repayments of debt". → rule
  5: gross lines, members' advances and their repayments apart.
- **230-10-45-24** (EY p. 15; ASU 2016-18 pp. 4-5): the statement reports
  net cash from operating, investing and financing activities and "the
  net effect of those flows" on cash, "in a manner that reconciles
  beginning and ending totals". → rule 9, the footing.
- **230-10-45-25** (EY p. 8; ASU 2016-15 p. 10): entities "are encouraged
  to report major classes of gross cash receipts and gross cash payments";
  those that do "shall, at a minimum, separately report" (a) cash
  collected from customers, (b) interest and dividends received, (c) other
  operating cash receipts, (d) cash paid to employees and other suppliers,
  (e) interest paid, (f) income taxes paid, (g) other operating cash
  payments. → rule 5, the operating classes; the direct method is a
  choice the standard encourages, not one it requires.
- **230-10-45-28** (EY p. 10; DART 3.1): the indirect method adjusts net
  income to remove (a) deferrals and accruals of operating receipts and
  payments, such as changes in receivables and payables, and (b) items
  with no operating cash effect, including those "whose cash effects are
  related to investing or financing cash flows, such as gains or losses on
  sales of property, plant, and equipment". → rule 8's G and W.
- **230-10-45-29** (EY p. 7; DART 3.1): the reconciliation of net income
  to operating cash is required with either method; it "shall separately
  report all major classes of reconciling items", at a minimum the
  changes in operating receivables, inventory and payables.
- **230-10-45-30** (EY p. 8; DART 3.1): with the direct method, that
  reconciliation "shall be provided in a separate schedule." → rule 8.
- **230-10-50-3** (EY p. 47): investing and financing activities that
  "affect recognized assets or liabilities but that do not result in cash
  receipts or cash payments in the period shall be disclosed", narrative
  or in a schedule. → rule 7.
- **230-10-50-4** (EY p. 47): its examples, among them: "converting debt to equity";
  acquiring assets by assuming directly related liabilities; obtaining a
  right-of-use asset for a lease liability (the old "capital lease"
  wording, replaced); receiving a gift of an asset; exchanging noncash
  assets or liabilities for others (also a beneficial interest obtained
  in a securitization, not listed here). → rule 7's exchange inside one
  section.
- **230-10-50-5** (EY p. 47): "Some transactions are part cash and part
  noncash; only the cash portion shall be reported in the statement of
  cash flows." → rule 3.
- **230-10-50-6** (EY p. 47): with only a few noncash transactions, they
  may be on the same page as the statement; otherwise elsewhere, clearly
  referenced to it. → the printed statement's noncash schedule.
- **830-230-45-1** (EY p. 81; DART 7.1): the effect of exchange-rate
  changes on cash held in foreign currencies is reported as a separate
  part of the reconciliation of the change in cash. → B-14's scope note
  (single-currency books, R-5).
- **105-10-05-1, 05-2, 05-3** (read only in their 2009 text, ASU 2009-01
  Appendix B, pp. 17-18, https://storage.fasb.org/ASU2009-01.pdf; the
  current wording is not confirmed): the Codification is "the source of
  authoritative generally accepted accounting principles"; where it does
  not specify, an entity first considers principles for similar
  transactions "and then consider[s] nonauthoritative guidance from other
  sources"; practices not in the Codification are nonauthoritative
  (sources include accounting textbooks, handbooks and articles). → rule
  11: the Codification does not address payments made on the entity's
  behalf (below), so this is where firm guidance comes in; rule 11
  follows it (D-42), a choice the standard leaves open, not a requirement
  of any paragraph.

Also read there, for the design (not authoritative, 105-10-05-3):

- DART 6.1.3 and EY 5.3.1 and 5.3.3 (equipment on account: payments soon
  after purchase are investing, "soon" read by the SEC staff as three
  months or less; the change in payables in the reconciliation leaves
  out payables for investing; the noncash disclosure is the liability
  that remains unpaid at the period's end). → rule 12.
- Payments a third party makes, or cash it receives, on the entity's
  behalf (rule 11, D-42). No ASC paragraph addresses them: PwC Viewpoint,
  Financial statement presentation 6.9.3 ("ASC 230 does not address these
  situations"); KPMG Handbook, Statement of cash flows (March 2026)
  Q8.3.10 ("Topic 230 does not directly address"); BDO Blueprint,
  Statement of cash flows under ASC 230 (December 2025) 3.4 ("While ASC 230
  is silent"); EY 4.6.2 ("we believe judgment will be needed"). Read
  2026-10-20 for D-42, in each firm's public text (PwC
  https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_6_statement__US/69_supplementary_cash.html;
  DART https://dart.deloitte.com/USDART/home/codification/presentation/asc230-10/roadmap-statement-cash-flow/chapter-7-common-issues-related-cash/7-2-constructive-receipt-disbursement;
  BDO https://arch.bdo.com/Statement-of-Cash-Flows-Under-ASC-230; EY as
  above):
  - **PwC 6.9.3.1** (Constructive receipts and disbursements): "a reporting
    entity should include cash flows received or paid by a third party on
    behalf of the reporting entity", as though through its own accounts.
    Its examples: a transfer agent moving a new lender's proceeds to pay
    off the old lender (gross up both), and a bank paying a vendor at the
    entity's instruction ("a financing inflow for the receipt of the debt
    proceeds", and an operating outflow for the vendor). "Judgment is
    required."
  - **DART Roadmap 7.2** (Constructive receipt and disbursement): when a
    third party handles cash on the entity's behalf, the entity may have
    constructive receipt or disbursement, because "the same economic
    result would be achieved if the cash had been received by or disbursed
    to" it directly. Inventory financed by an unrelated lender that pays
    the supplier: a financing inflow and an operating outflow, repayments
    financing; a mortgage lender wiring the seller: a financing inflow and
    an investing outflow; Example 7-2, a lender paying an insurance
    premium: an operating outflow for the premium and a financing inflow.
    The contrast is a supplier's own finance subsidiary (AICPA Technical
    Q&A 1300.16, and the SEC staff at the 2005 AICPA conference): a trade
    loan, noncash.
  - **BDO 3.4** (Constructive disbursements and receipts): among its cases,
    "A parent might pay on behalf of a subsidiary expenses that are
    recognized in the subsidiary's separate financial statements"; an
    entity "generally should report constructive cash flows when it
    contracts with a third party to act on its behalf (for example, a
    transfer agent, investment bank, or lender) or when cash does not flow
    through the entity's cash accounts for administrative convenience".
    Example 3-5: a bank remitting the price of equipment to the supplier,
    an investing outflow and a financing inflow, later principal payments
    financing (citing TQA 1300.19); Example 3-6: a refinancing through an
    agent, a financing inflow and outflow; Example 3-4: the supplier's own
    finance subsidiary, noncash (TQA 1300.16).
  - **EY 5.2.4 and 5.3.1**: inventory or equipment financed by a third
    party (not the seller) is an operating or investing outflow and a
    financing inflow; seller-financed purchases are noncash "to the extent
    of the initial seller financing", disclosed under 50-3 to 50-6, and
    later principal payments are financing whichever financed them.
  - **KPMG Q8.3.10** accepts a noncash presentation (citing 50-3) for
    property and equipment a lender pays for.

  → rule 11 (D-42): constructive receipt and disbursement for what a
  member (through the members' financing account, or capital for an
  expense) or a lender pays or receives for the company; noncash for
  property a member already owned (50-4) and for the seller's own credit
  (EY 5.3.1). The expense-to-capital case follows BDO 3.4's parent paying
  a subsidiary's expenses, and the substance test of DART 7.2 and PwC
  6.9.3.1, which turn on who paid whom, not on how the entity records
  what it owes back.

## 606-10-55-36 through 55-38 (Revenue: principal or agent)

An entity controlling the specified good or service before transfer is
the principal (55-37) and recognizes revenue "in the gross amount of
consideration" it expects (55-37B); an agent recognizes only its fee or
commission (55-38).
→ B-17: an app seller is the principal for its app, so its revenue is
the gross price; the platform's commission is an expense.

## 450-30-25-1 (Gain contingencies)

Added 2026-10-21 for B-37 from the paragraph's text as Deloitte's DART
roadmaps quote it (originally FAS 5 ¶17(a)); not re-read in the ASC
basic view: check it there at the next reading. A contingency that might
result in a gain "usually should not be reflected in the financial
statements because to do so might be to recognize revenue before its
realization."
→ B-37 item 4: a payment hoped for from work done on spec is recorded
neither as a receivable nor as income until it is received; the
unrecovered cost is a figure, never an asset.

## 340-40-25-5 (Costs to fulfill a contract)

Added 2026-10-21 for B-37 as the DART revenue roadmap sets it out; not
re-read in the ASC basic view: check it there at the next reading. Costs
incurred to fulfill a contract (one not in another Topic's scope) are an
asset only if all three criteria are met: they relate directly to a
contract or an anticipated contract the entity can specifically
identify; they generate or enhance resources used in satisfying
performance obligations in the future; and they "are expected to be
recovered."
→ B-37 item 4 (with B-22): on-spec work has no contract it is expected
to recover its costs from, so its costs are expensed as incurred.

## 340-40-25-7 (Costs that relate directly to a contract)

Added 2026-10-22 for B-37 item 8 as the DART revenue roadmap sets it
out; not re-read in the ASC basic view: check it there at the next
reading. The costs that "relate directly to a contract" (25-5(a)) are
(a) direct labor, (b) direct materials, (c) allocations of costs that
relate directly to the contract or its activities (supervision,
insurance, depreciation of the tools used on it), (d) costs explicitly
chargeable to the customer, and (e) other costs incurred only because
the entity entered into the contract (payments to subcontractors, for
one). Allocations are among the directly related costs, not set apart
from them.

## 340-40-25-8 (Costs expensed when incurred)

Added 2026-10-22 with 25-7, from the same DART chapter (13.3), likewise
to check in the basic view. Expensed when incurred: general and
administrative costs (unless explicitly chargeable to the customer under
the contract), costs of wasted materials, labor or other resources not
reflected in the contract's price, costs that relate to satisfied (or
partly satisfied) performance obligations, and costs the entity cannot
tell apart between satisfied and unsatisfied obligations.
→ B-37 item 8 (with 25-7): a cost traceable to one job (25-7(a), (b),
(d), (e)) is that job's, whole, on the document's line; a cost that
relates to several jobs reaches them only by an allocation on a stated
basis (25-7(c)), which the books record as the allocation convention's
own entries, never as a percentage on the document; general and
administrative cost (25-8) is company overhead, no project's.