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Accounting Reference15

Industries and Special Situations

Nonprofits, government grants, foreign currency, research and development, and project businesses.

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Reference Notes

Revenue and cash management for professional services and project businesses: unbilled work, fixed-fee projects that lose money

A services business recognizes revenue as it performs, which for time-and-materials work is as hours are delivered and for fixed-fee projects is usually by an input measure such as cost or hours incurred against the total expected. Unbilled work is a receivable when only the passage of time stands between it and payment and a contract asset when payment depends on something else, such as a milestone (ASC 606-10-45-3, 45-4); billing ahead of performance is a contract liability. US GAAP has no general rule for loss-making contracts: a loss is provided for in advance only where specific guidance requires it, such as construction-, production-, architecture- and engineering-type contracts (ASC 605-35), whereas IFRS requires it for any onerous contract (IAS 37). Utilization, realization and work in progress are the metrics that explain the margin.

Source: FASB ASC 606 (over-time recognition), 606-10-45-3 and 45-4 (contract assets and receivables); ASC 605-35 (anticipated losses, for contracts in its scope); IAS 37; practiceLast revised September 2026General information, not advice

Nonprofit accounting: net assets, restrictions, functional expenses

A nonprofit reports net assets in two classes, with and without donor restrictions, and reclassifies amounts from net assets with donor restrictions to net assets without donor restrictions as each restriction is met. Contributions are recognized when unconditional; a conditional promise waits for the condition. Expenses are presented by both nature and function, program against management and fundraising, and the allocation basis is written down because donors and auditors ask for it.

Source: FASB ASC 958Last revised September 2026General information, not advice

Foreign currency: transactions, remeasurement and translation

A transaction in another currency is recorded at the rate on its date, and the receivable or payable is remeasured at each period end with the difference in earnings. A subsidiary with a different functional currency is translated into the reporting currency with assets and liabilities at the period-end rate, equity at historical rates, and income and expenses at the rates on their dates, usually approximated by an average; the difference goes to other comprehensive income and accumulates in equity as the cumulative translation adjustment until the subsidiary is sold or substantially liquidated (ASC 830-30-45, 830-30-40-1). Deciding each entity's functional currency comes first, and it is a judgement about the economics rather than the country.

Source: FASB ASC 830 (830-20 transactions; 830-30 translation)Last revised September 2026General information, not advice

Capitalizing software development: internal-use software, developers' time, technological feasibility

Under US GAAP, software a company builds to run its business, or to host as a service that customers use without taking a copy, falls under ASC 350-40: the costs of planning it, and of training and maintenance once it is ready for use, are expensed, and qualifying costs of the application development stage, such as developers' pay for coding and testing, are capitalized and amortized over its useful life. ASU 2025-06 replaces those stages, for annual periods beginning after December 15, 2027 with earlier adoption permitted, with one test: capitalization starts once management has authorized and committed to funding the project and it is probable the project will be completed and its result used as intended, with no significant development uncertainty left. Software to be sold, licensed or otherwise marketed falls under ASC 985-20 instead, where costs are expensed as research and development until technological feasibility is established, which for most products leaves little to capitalize. IFRS capitalizes development costs that meet its own criteria (IAS 38), so a US company should not borrow that answer, and the tax treatment of the same spending is a separate question for a preparer.

Source: FASB ASC 350-40 (internal-use software; ASU 2025-06); ASC 985-20; IAS 38Last revised September 2026General information, not advice

Research and development costs, R&D expensing, section 174 and 174A research expenditures

Under US GAAP, research and development costs are expensed as incurred, including the salaries, contractor fees and supplies that go into them, except equipment and materials with alternative future uses, which are capitalized (ASC 730); research performed for somebody else under a contract is outside that rule. For tax, the 2025 federal tax act (Public Law 119-21) restored the immediate deduction of domestic research or experimental expenditures for tax years beginning after December 31, 2024, under a new section 174A, while foreign research is still amortized, and it gave taxpayers ways to recover domestic amounts still being amortized from earlier years, with more options for small businesses. Software development costs are research expenditures for tax purposes even where the books capitalize them, so the book and tax treatment of the same spending can differ and create a deferred tax item. Which costs qualify, and how to claim them, is a preparer's decision on the company's facts.

Source: FASB ASC 730; IRC 174 and 174A as amended by P.L. 119-21; general information, a tax preparer decides the specificsLast revised September 2026General information, not advice

Government grants: grant income, grants for equipment or buildings, forgivable loans, PPP loans, ASU 2025-10 and ASC 832

Until ASU 2025-10 takes effect for it, US GAAP has no general model for a grant a business receives from a government, so a company chooses a policy by analogy, most often IAS 20 or the contribution guidance in ASC 958-605, applies it consistently and discloses it; a forgivable loan, such as a PPP loan, is carried as debt under ASC 470 until it is legally released (ASC 405-20) unless the company chose and disclosed a grant model. ASU 2025-10 creates ASC 832, effective for public business entities for annual periods beginning after December 15, 2028 and for all other entities a year later, with earlier adoption permitted. Under it a grant is recognized once it is probable the company will comply with its conditions and the grant will be received, which reaches forgivable loan proceeds when forgiveness is probable; a grant for costs is recognized in earnings over the periods in which the costs it compensates are expensed, and a grant for an asset is either carried as deferred income or deducted from the asset's cost. The grant agreement's conditions decide what the company must do to keep the money, so the agreement is kept with the books and its conditions are checked at every close.

Source: FASB ASC 832 (ASU 2025-10, issued December 2025); IAS 20 and ASC 958-605 by analogy before it; ASC 470 and ASC 405-20 for a loanLast revised September 2026General information, not advice

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