Sales and transfers of nonfinancial assets

When an entity sells nonfinancial assets that are not an output of the entity’s ordinary activities, the guidance in ASC 610-20 may apply rather than the guidance in ASC 606, which applies to sales of nonfinancial assets that are an output of the entity’s ordinary activities. Before the FASB issued ASU 2014-09, which created both ASC 606 and ASC 610-20 in the Codification, sales of nonfinancial assets were accounted for under different areas of guidance in U.S. GAAP—sales of real estate under ASC 360-20, sales of intangible assets under the limited guidance in ASC 350, and sales of property, plant, and equipment under ASC 360. These different areas of guidance had different criteria for derecognizing transferred assets and for recognizing gains on sales of nonfinancial assets, as well as different disclosure requirements. ASC 610-20 consolidates much of this disparate guidance into a single Subtopic in the Codification and aligns the financial statement impact of these economically similar transactions.

The guidance in ASC 610-20 is based on the concepts within ASC 606, requiring entities to apply the guidance in ASC 606 on contract existence, control, and measurement. The FASB noted that there is little economic difference between the sale of an asset that is and one that is not an output of the entity’s ordinary activities, and decided to align the accounting for both types of sales. As a result, the most significant way that sales of nonfinancial (and in substance nonfinancial assets) within the scope of ASC 610-20 are distinguished from sales within the scope of ASC 606 is how they are presented in the income statement: transactions within the scope of ASC 610-20 are not presented as revenue but as gains or losses.

This publication explains which transactions fall within the scope of ASC 610-20 and how those transactions are accounted for under that guidance. It includes direct citations from the FASB’s Codification, examples created to illustrate this guidance, and insights based on our consultations with colleagues and standard-setters.

Download the guide here.