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Chapter 17 — Sales of Nonfinancial Assets Within the Scope of ASC 610-20

17.4 Gain or Loss Recognition for Nonfinancial Assets

17.4 Gain or Loss Recognition for Nonfinancial Assets

ASC 610-20 applies many of the same principles as ASC 606 for determining the gain or loss to recognize when a nonfinancial asset or in-substance nonfinancial asset is derecognized. Specifically, ASC 610-20 incorporates the requirements for determining:
  • When a contract exists (i.e., step 1).
  • Which nonfinancial assets or in-substance nonfinancial assets are distinct (i.e., step 2).
  • The amount of consideration to be included in the determination of the gain or loss recognized, including an estimate of variable consideration and the application of the “constraint” (i.e., step 3).
  • How to allocate the amount of consideration determined in step 3 to each distinct nonfinancial asset or in-substance nonfinancial asset (i.e., step 4).
  • When control of any nonfinancial asset or in-substance nonfinancial asset is transferred and results in the recognition of a gain or loss (i.e., step 5).

Footnotes

2
When recognizing a gain or loss on sales of nonfinancial assets or in-substance nonfinancial assets that are not contracts with customers, an entity must first consider whether, under ASC 810, it ceases to have a controlling financial interest in the legal entity that holds the nonfinancial assets or in-substance nonfinancial assets. If the controlling financial interest is lost, the entity should then consider whether control of the nonfinancial assets or in-substance nonfinancial assets is transferred in accordance with ASC 606 (see Section 17.4.1).
3
As noted in Section 6.5, ASU 2016-12 clarifies that the measurement date for noncash consideration is the contract inception date.