The Financial Accounting Standards Board has released a new accounting standards update clarifying some aspects of its revenue recognition standard.

The update involves the recognition of gains from the derecognition of nonfinancial assets in contracts with noncustomers. It amends the guidance in Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, of the FASB Accounting Standards Codification. The original guidance was part of the revenue recognition standard that FASB issued in May 2014 in conjunction with the International Accounting Standards Board.

The amendments in the update clarify the scope of the standard by defining the term in substance nonfinancial asset and making some other changes. For instance, the amendments exclude all businesses (including real estate businesses) and nonprofit activities from the scope of Subtopic 610-20. Instead, the derecognition of all businesses and nonprofit activities (except those involving conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the guidance in Subtopic 810-10, Consolidation—Overall.

The new amendments also offer guidance on the accounting for what are frequently referred to as partial sales of nonfinancial assets, which are common in the real estate industry, and contributions of nonfinancial assets to a joint venture or other noncontrolled investee. On top of that, the amendments eliminate the exception in Topic 860, Transfers and Servicing, for transfers of investments—including equity method investments—in real estate businesses.

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.