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ASC 420 addresses the accounting for involuntary termination benefits that are provided pursuant to a one-time benefit arrangement, and not part of an ongoing written or substantive plan. The distinction is important as it can have a significant effect on the timing of recognition of the cost of those benefits. As a general rule, severance benefits provided pursuant to an ongoing plan will be accrued when probable and reasonably estimable, whereas one-time termination benefits cannot be accrued until the terms of the benefit arrangement have been communicated to the affected employees, and may need to be spread over a future service period through the termination date.

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