This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Discontinued Operations

Date recorded:

Discontinued Operations - Definition and Disclosures

The Boards re-deliberated the proposed amendments to discontinued operations guidance. Without much discussions the Boards agreed the (slightly modified) IASB definition of a discontinued operation:

A discontinued operation is 'a component that either has been disposed, or is classified as held for sale, and

  • (a) represents a separate major line of business or geographical area of operations,
  • (b) is part of a single co-ordinated plan to disposed of a separate major line of business or geographical area of operations, or
  • (c) is a business that meets the criteria to be classified as held for sale on acquisition'.

The Boards also agreed that following disclosures should be included for current and prior periods presented in the financial statements:

  • a. The profit or loss, together with major income and expense items constituting that profit or loss, including impairments, interest, depreciation, and amortisation;
  • b. The major classes of cash flows (operating, investing, and financing);
  • c. A reconciliation of the major classes of assets and liabilities classified as held for sale in the notes to the financial statements to total assets and total liabilities classified as held for sale that are presented separately on the face of the statement of financial position income;
  • d. A reconciliation of the profit or loss for disposals presented in the notes to the financial statements to the after-tax profit or loss from discontinued operations presented on the face of the statement of comprehensive income;
  • e. If the component includes a non-controlling interest, the profit or loss attributable to the parent.

In addition, both Boards agreed to require disclosures about disposals of long-lived assets and disclosures about significant components of an entity that did not qualify as discontinued operations but without providing details of the related cash flows.

The Boards continued with a lively discussion of additional disclosures regarding the entity's continuing involvement with the disposed component and the continuing cash flows between the ongoing entity and the disposed component. Most Board members were concerned that the proposed disclosures regarding continuing cash flows were excessive and not operational. The Boards clarified that only the disclosures regarding continuing involvement should be provided. Moreover, the Boards agreed that those disclosures should be provided only for the discontinued operations presented in the current financial statements to achieve comparability and avoid 'creating' artificial growth in earnings through classifying operations as discontinued.

The Boards agreed to propose a prospective application of the Standard with the effective date of 1 January 2011 (15 December 2010 for the U.S. GAAP).

On the need for re-exposure, both Boards tentatively agreed that re-exposure was warranted and agreed to align publication dates and comment periods. Both Boards will revisit that decision in January with a formal staff paper.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.