FASB to Clarify Reporting on Partial Sales of Buildings

By Steve Burkholder

April 20 — Companies executing partial sales of buildings and other nonfinancial assets should have more certainty in accounting for the transactions in draft guidance the Financial Accounting Standards Board approved.

FASB also expects a streamlining of financial reporting in its planned clarifications and other intended improvements to amendments to Accounting Standards Codification 610-20 that it approved April 20.

Based on Revenue Standard

The guidance in the gains and losses from the derecognition of nonfinancial assets grew out of the far-reaching 2014 standard on revenue recognition—ASC 606, issued as Accounting Standards Update 2014-09, and the elimination of old rules on real estate in ASC 360-20.

In its limited rulemaking, FASB targeted in part the lack of certainty of how to account for partial-sales transactions, such as selling one building out of a collection of several. The board focused especially on what constitutes an “in-substance nonfinancial asset.”

Change in Practice

FASB expects the planned amendments to change “historical practice” in certain sectors, according to a handout prepared for the board‘s April 20 meeting. However, commercial real estate enterprises and other companies would have to follow ASC 610-20 by applying the relevant changes in the revenue recognition standard with or without the proposed amendments on nonfinancial assets, FASB's staff noted.

FASB set a 60-day comment period for the draft guidance, which is to be issued later this year.

To contact the reporter on this story: Steve Burkholder in Norwalk, Conn., at sburkholder@bna.com

To contact the editor responsible for this story: Steven Marcy at smarcy@bna.com

For More Information

The April 20 FASB meeting handout on the nonfinancial assets issues is available at http://src.bna.com/ehg.