The Board continued its deliberations of ED 4 by addressing issues raised in the comment letters on question 5-9 in the Exposure Draft.

Question 5 asked for comments on the proposed accounting for impairment losses arising from revalued assets. The Board retained its requirements in ED 4 that revaluation decreases (and revaluation increases) should be accounted for in accordance with the standard under which the assets were revalued upon initial classification as held for disposal. The change in valuation related to the recognition of costs to sell should be included in profit or loss for the period.

The Board decided that the measurement of current and non-current assets under IAS 40, Investment Property, and IAS 41, Agriculture, would continue under those standards. That is, if an asset is accounted for at fair value under IAS 40 or IAS 41, it would be outside of the scope of ED 4 if held for sale as an individual item. Non-current assets previously accounted for under IAS 40 and IAS 41 would, however, be within the scope of ED 4 if part of a disposal group.

Question 6 of the Exposure Draft asked for comments on the proposed removal of the exemption from consolidation for subsidiaries acquired and held exclusively with a view to resale. The Board confirmed the decision in ED 4 to remove this exemption. Several members of the Board were clearly concerned about practicability issues and suggested a single line item be presented on the balance sheet that would be marked to market (therefore avoiding a requirement to assign fair values in the purchase price allocation). In the end, the Board noted that this project was on the agenda as a convergence project and that a consistent approach with FAS 144 was desired.

Regarding Question 7, the Board reaffirmed that assets and liabilities of the disposal group should be presented separately on the balance sheet. Additionally, items representing revenue, expenses, pre-tax profit and loss and tax of the operations held for disposal (along with any gain or loss on remeasurement) shall be presented.

Question 8 asked for comments on the criteria for when a component of an entity should be classified as a discontinued operation. The Board noted serious concern over the proposal in the Exposure Draft as a result of comments received. For example, the Board was comfortable that a men's clothing store that decided not to sell shoes anymore would have a discontinued operation. However, the Board was not comfortable with the fact that the current wording in ED 4 would require the sale of an investment property by a Real Estate Investment Trust (REIT) to be classified as a discontinued operation. A company (such as a REIT) that buys and sells items as part of its primary business would then have a discontinued operation every year. Additionally, the requirement to restate prior periods for the discontinued operation would render the comparative period continuously invaluable.

The Board is concerned about this issue and suggested further work be done in this area before a final standard could be issued. The Board noted the EITF is addressing this issue. However, some Board members noted that if this issue cannot be solved, they would view ED 4 as not operational. The Board will address this further at its February meeting.

Question 9 addressed the presentation of discontinued operations in the income statement. The Board concluded that it would not require that revenue, expenses, pre-tax profit or loss, and any related tax expense be separately presented on the face of the income statement. If a single item (net of tax expense) is presented on the face of the income statement for discontinued operations, separate presentation of revenue, expenses, pre-tax profit or loss, and related tax expense is required in the notes to the financial statements.

The Board discussed some concerns over whether the application of IAS 8 on the transition to the proposed standard would be operational. The Board decided to clarify that retrospective application would be allowed only when the information to comply already exists. This wording would incorporate aspects of the definition of impracticability in the revised IAS 8 and the wording in ED 2 on the retrospective application of that standard to share-based payments prior to the effective date.

The Board also confirmed that assets from insurance contracts (such as deferred acquisition costs) would be within the scope of ED 4.