When an entity sells assets that are an output of its ordinary activities to a customer, the sale is accounted for as a revenue transaction under the guidance in ASC 606. But, when nonfinancial assets sold by an entity are not an output of the entity’s ordinary activities, the sale may be subject to the guidance in ASC 610-20 rather than in ASC 606. Sales of nonfinancial assets include the sale of tangible assets, including finished goods, land, buildings, equipment, furniture, and fixtures, as well as the sale of intangible assets, such as intellectual property.
ASC 610-20 applies to various categories of sales of nonfinancial assets that were previously accounted for under other topics in U.S. GAAP. For instance, sales of real estate were addressed in ASC 360-20; sales of intangible assets were addressed by the limited guidance in ASC 350; and sales of property, plant, and equipment were addressed in ASC 360. The guidance in ASC 610-20 is based on the concepts in ASC 606, requiring entities to apply the guidance in ASC 606 on contract existence, control, and measurement to these sales/transfers. The most significant ways 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—and how they are disclosed. There are also some differences in how intra-entity profits in downstream sales to an equity method investee are treated.
Grant Thornton’s publication, Sales and transfers of nonfinancial assets: Applying ASC 610-20, explains which transactions fall within the scope of ASC 610-20 and how those transactions are accounted for under that guidance. It has been updated as of October 2022 to incorporate additional examples and practice issues.
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