Deferred Commissions Under ASC 340-40: Capitalizing and Amortizing Costs to Obtain a Contract
Written by Harry Prabandham
Curated by Rubric Financial
Last updated
1 / 5
What ASC 340-40 Requires
- ASC 340-40 governs the incremental costs of obtaining a customer contract, and it is the companion guidance to the ASC 606 revenue standard.
- An incremental cost is one you would not have incurred if the contract had not been signed, and a sales commission is the classic example.
- If the cost is incremental and you expect to recover it, you must capitalize it as an asset rather than expense it immediately.
- This treatment is not optional under GAAP, so accrual-basis SaaS companies cannot simply run commissions through the income statement as they are paid.
Go deeper on this topic: SaaS Revenue Recognition Under ASC 606: A Founder's Guide to Getting It Right→
Related Resources
Lease Accounting Under ASC 842
A guide to ASC 842 for startups, explaining how to put office and equipment leases on the balance sheet as a right-of-use asset and lease liability.
Startup AccountingRefunds, Credits, and Clean Reconciliation
How to record refunds and credits correctly so revenue, cash, and customer balances always reconcile in the books.
Startup AccountingAccounts Payable & Vendor Management
Set up AP workflows, negotiate payment terms, and manage vendor relationships to optimize cash flow.
About the author
Harry PrabandhamFounder & CEO
Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.
More articles by Harry →Related tools and reading
What a fractional CFO costs
2026 pricing: hourly rates, monthly retainers, and what drives the number.
Free toolFractional CFO Cost Calculator
What a fractional CFO costs at your stage, against published 2026 prices.
GuideWhat Belongs in SaaS COGS and How to Compute Gross Margin
A practical guide to defining SaaS cost of revenue and calculating gross margin correctly, including AI inference costs and benchmarks.
InsightStartup CFO Digest: Week 41, October 2026
This week's funding and valuation data shows active capital deployment tempered by selectivity, while foundational questions about moats, liquidity timelines, and board governance demand founder attention. AI valuations remain frothy, but the underlying shifts toward workflow integration and long-term liquidity structure signal where returns will actually come from.
GlossaryASC 606
GAAP revenue recognition standard for contracts with customers.
ServiceCFO for startups
What a startup CFO does, when to hire one, and what it costs by stage.
Want your books handled properly?
A bookkeeper and CPA who work as one team, with your monthly close done and your ledger ready for diligence.
No spam, ever. If the download doesn't start, email us.
Or talk it through:
