17.1 Overview and Background
ASC 610-20
05-1 This Subtopic provides
guidance on the recognition of gains and losses on transfers
of nonfinancial assets and in substance nonfinancial assets
to counterparties that are not customers. Although the
guidance in this Subtopic applies to contracts with
noncustomers, it refers to revenue recognition principles in
Topic 606 on revenue from contracts with customers.
ASU
2014-09 provides guidance on the
recognition and measurement of transfers of
nonfinancial assets, which is codified in ASC
610-20. The revenue standard amends or supersedes
the guidance in ASC 350 and ASC 360 on determining
the gain or loss recognized upon the derecognition
of nonfinancial assets, including in-substance
nonfinancial assets, that are not an output of an
entity’s ordinary activities, such as sales of (1)
property, plant, and equipment; (2) real estate;
or (3) intangible assets. ASC 610-20 does not
amend or supersede guidance that addresses how to
determine the gain or loss on the derecognition of
a subsidiary or group of assets that meets the
definition of a business. Gains or losses
associated with these transactions will continue
to be determined in accordance with ASC
810-10-40.
In response to stakeholder feedback indicating that (1) the meaning of the term
“in-substance nonfinancial asset” is unclear
because the revenue standard does not define it
and (2) the scope of the guidance on nonfinancial
assets is confusing and complex and does not
specify how a partial sales transaction should be
accounted for or which model entities should
apply, the FASB issued ASU
2017-05, which clarifies the scope
of ASC 610-20 as well as the accounting for
partial sales of nonfinancial assets. The newly
established guidance in ASC 610-20 (which consists
of guidance in ASU 2014-09, as amended by ASU
2017-05) conforms the derecognition guidance on
nonfinancial assets with the revenue model in ASC
606.