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FASB issues guidance on derecognition and partial sales of nonfinancial assets

  • FASB document Image

Feb 23, 2017

The FASB has issued Accounting Standards Update (ASU) No. 2017-05, “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.”

The ASU’s amendments include the following:

  • Clarification that “nonfinancial assets within the scope of [ASC] 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty.”
  • Clarification that “an entity should allocate consideration to each distinct asset by applying the guidance in [ASC] 606 on allocating the transaction price to performance obligations.”
  • A requirement for entities “to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it (1) does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with [ASC] 810 and (2) transfers control of the asset in accordance with [ASC] 606.”

The effective date of the new guidance and the transition methods are aligned with the requirements in the new revenue standard, as amended by ASU 2015-14, which delays the effective date of the new revenue standard (ASU 2014-09) by one year and permits early adoption on a limited basis.

For more information, see Deloitte's related Heads Up newsletter as well as the ASU on the FASB’s Web site.

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