FASB redefines discontinued operations

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10 Apr 2014

Today, the FASB issued Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." Under the ASU, only disposals that represent a strategic shift that has (or will have) a major effect on the entity’s results and operations would qualify as discontinued operations. In addition, the ASU (1) expands the disclosure requirements for disposals that meet the definition of a discontinued operation, (2) requires entities to disclose information about disposals of individually significant components, and (3) defines “discontinued operations” similarly to how it is defined under IFRS 5, "Non-current Assets Held for Sale and Discontinued Operations."

The ASU notes that “[e]xamples of a strategic shift that has (or will have) a major effect on an entity’s operations and financial results could include a disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity.”

The ASU also requires entities to expand their disclosures about discontinued operations to include more information about assets, liabilities, income, expenses. In addition the ASU would also require entities to disclose the pre-tax income attributable to a disposal of “of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements.”

The new standard is effective in the first quarter of 2015 for public organisations with calendar year ends. For most nonpublic organisations, it is effective for annual financial statements with fiscal years beginning on or after 15 December 2014. Early adoption would be permitted for any annual or interim period for which an entity’s financial statements have not yet been made available for issuance.

For more information, see Deloitte's Heads Up newsletter and the press release, ASU 2014-08, and FASB in Focus, on the FASB website.

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