Tentative Board Decisions
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Clarifying the scope of Subtopic 610-20 and accounting for partial sales of nonfinancial assets. The Board discussed and made the following decisions about the accounting for undivided interests, the unit of account in partial sales transactions, and transition method.
The Board decided not to provide any explicit guidance on sales of an undivided interest in an asset in Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets.
Unit of Account in Partial Sales Transactions
The Board decided to maintain consistency with Topic 606, Revenue from Contracts with Customers, and require that the assessment of control be evaluated from the perspective of the counterparty in the transaction. The Board decided to clarify how an entity evaluates the transfer of control when the entity transfers ownerships interests in a subsidiary that consists of assets subject to Subtopic 610-20. For example:
- If an entity promises to transfer a 100 percent ownership interest in a wholly owned subsidiary to a single party, the entity transfers control of an asset when the counterparty in the contract obtains control of the asset.
- If an entity promises to transfer an ownership interest in a subsidiary to multiple parties and does not retain an ownership interest in the former subsidiary, the entity transfers control of an asset when the other parties are deemed to collectively control the asset.
- If an entity promises to transfer an ownership interest in a subsidiary and retains a noncontrolling ownership interest in that former subsidiary, the entity transfers control of an asset if (or when) the former subsidiary controls the asset.
Subtopic 610-20 was issued as part of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), and will be effective the same time as Topic 606. Update 2014-09 allows entities to apply the amendments using a full retrospective or modified retrospective approach. The Board decided that an entity does not need to apply the same transition method for Topic 606 and Subtopic 610-20. For example, an entity can elect to apply the modified retrospective approach to Subtopic 610-20 and the full retrospective approach to Topic 606.
The Board clarified that if an entity applies a different transition approach to Subtopic 610-20 transactions, it must comply with the disclosure requirements for that approach. In addition, the entity should disclose the method of transition for both Subtopic 610-20 and Topic 606.