3.8 Recognition of a Gain or Loss Upon Sale of the Disposal Group
ASC 360-10
40-3A An entity
shall account for the derecognition of a nonfinancial asset,
including an in substance nonfinancial asset and an asset
subject to a lease, within the scope of this Topic in
accordance with Subtopic 610-20 on gains and losses from the
derecognition of nonfinancial assets, unless a scope
exception from Subtopic 610-20 applies. For example, the
derecognition of a nonfinancial asset in a contract with a
customer shall be accounted for in accordance with Topic 606
on revenue from contracts with customers.
40-3B An entity
shall account for the derecognition of a subsidiary or group
of assets that is either a business or nonprofit activity in
accordance with the derecognition guidance in Subtopic
810-10.
40-3C If an
entity transfers a nonfinancial asset in accordance with
paragraph 360-10-40-3A, and the contract does not meet all
of the criteria in paragraph 606-10-25-1, the entity shall
not derecognize the nonfinancial asset and shall follow the
guidance in paragraphs 606-10-25-6 through 25-8 to determine
if and when the contract subsequently meets all the criteria
in paragraph 606-10-25-1. Until all the criteria in
paragraph 606-10-25-1 are met, the entity shall continue to
do all of the following:
- Report the nonfinancial asset in its financial statements
- Recognize depreciation expense as a period cost unless the assets have been classified as held for sale in accordance with paragraphs 360-10-45-9 through 45-10
- Apply the impairment guidance in Section 360-10-35.
Recognition of Gain or
Loss From Sale
40-5 A gain or
loss not previously recognized that results from the sale of
a long-lived asset (disposal group) shall be recognized when
the long-lived asset (disposal group) is derecognized in
accordance with applicable Topics (for example, Topic 610 on
other income, Topic 810 on consolidation, or Topic 860 on
transfers and servicing).
ASC 360-10-40-5 specifies that an entity recognizes any previously unrecognized
gain or loss from the sale of the disposal group when derecognizing the assets,
liabilities, and AOCI in accordance with applicable GAAP. The following decision
tree from ASC 610-20 depicts the process for determining which guidance an entity
should apply when derecognizing a disposal group, depending on the nature of the
assets or the transaction.
ASC 610-20
15-10 The following decision tree depicts the process for evaluating whether assets promised to a counterparty in a contract (or parts of a contract) shall be derecognized within the scope of this Subtopic. The decision tree is not intended as a substitute for the guidance in this Subtopic.
For more information about the application of ASC 610-20, see Deloitte’s Roadmap
Revenue
Recognition. For more information about the application of ASC
810, see Deloitte’s Roadmap Consolidation — Identifying a Controlling Financial
Interest.