Defining Issues | February 2017
FASB clarifies scope of derecognition of nonfinancial assets
KPMG reports on ASU 2017-05, which clarifies the guidance in ASC 610-20 on accounting for derecognition of a nonfinancial asset. The ASU also defines in-substance nonfinancial assets and includes guidance on partial sales of nonfinancial assets.
Applicability
- Company that sells nonfinancial assets (e.g. intangible assets, lands, buildings, or materials and supplies) to noncustomers
- Company that sells nonfinancial assets and financial assets (e.g. cash, receivables) when the value is concentrated in the nonfinancial assets
- Company that sells partial ownership interests in nonfinancial assets
- Does not apply to sales to customers or sales of businesses
Effective dates
Mandatory effective dates and early adoption provisions:
Annual periods:
For public business entities the effective date for annual periods is the fiscal years beginning after Dec. 15, 2017.
For all other entites the effective date for annual periods is the fiscal years beginning after Dec. 15, 2018.
Interim periods:
For public business entities the effective date for interim periods is the fiscal years beginning after Dec. 15, 2017.
For all other entites the effective date for interim periods is the fiscal years beginning after Dec. 15, 2019.
Early adoption allowed?
An entity is required to apply the amendments in this ASU at the same time that it applies the new revenue recognition standard. However, the earliest an entity may apply this ASU or the new revenue recognition standard is for annual and interim periods beginning after December 15, 2016.
* (1) public business entities; (2) not-for-profits that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market; and (3) employee benefit plans that file financial statements with the SEC.
Key impacts
- ASU clarifies that the guidance in ASC 610-20 on accounting for derecognition of a nonfinancial asset and an in-substance nonfinancial asset applies only when the asset (or asset group) does not meet the definition of a business and is not a not-for-profit activity
- Defines in-substance nonfinancial assets
- Provides guidance for partial sales of nonfinancial assets
Podcast
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Report contents
- Scope and summary of the new standard on other income
- Flowcharts that illustrate the scope and application of the new standard
- Derecognition and measurement matters
- Example that illustrates the guidance
- Effective dates and transition