At its February 3, 2010, meeting, the FASB Board voted to re-expose for public comment amendments to the Discontinued Operations guidance within ASC 205-20. The amendments are part of a joint project with the IASB to converge the definition of a discontinued operation. An exposure draft is expected in the second quarter of 2010 and would include a 60-day comment period.  The following is a summary of the tentative decisions reached by the Board.

Definition of a Discontinued Operation

The Board tentatively decided to adopt the following 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 coordinated plan to dispose 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 revised definition closely aligns with the definition of a discontinued operation that is currently under IFRS 5.

Required Disclosures

For components of an entity that meet the new definition of a discontinued operation, the Board tentatively decided to require the following disclosures for current and prior periods presented in the financial statements:

• The profit or loss, together with major income and expense items constituting that profit or loss, including impairments, interest, depreciation, and amortization
• The major classes of cash flows (operating, investing, and financing)
• 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
• 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
• If the component includes a noncontrolling interest, the profit or loss attributable to the parent

In addition, the Board tentatively decided to require certain disclosures for a significant component that does not meet the definition of a discontinued operation. These disclosures would include, for current and prior periods, the pre-tax profit or loss, a reconciliation of the disclosures within the notes to the amounts presented within the financial statements, and if the component includes a noncontrolling interest, the profit or loss attributable to the parent.

Finally, if an entity has continuing involvement or continuing cash flows with the discontinued operation, the entity would disclose (1) the nature of the activities that give rise to the continuing involvement and/or continuing cash flows, (2) the period of time the continued involvement and/or cash flows are expected, (3) the amount of continuing cash flows (as applicable), and (4) the amounts presented in continuing operations after the disposal that previously were eliminated in the consolidated financial statements as intra-entity transactions.

Scope of the Discontinued Operations Guidance

The Board tentatively decided to align the scope of ASC 205-20 with the scope of IFRS 5 to apply to all recognized non-current assets and to all disposal groups of an entity. Currently, ASC 205-20 excludes certain assets, including (not all inclusive) financial instruments (including equity method investments); deferred tax assets; certain oil and gas properties, and other long-lived assets for which the accounting is prescribed in ASC 928, Entertainment — Music, ASC 920, Entertainment — Broadcasters, ASC 985-20, Costs of Software to Be Sold, Leased, or Marketed, and ASC 980-360, Regulated Operations. The revised scope would apply to both entities that meet the definition of a discontinued operation as well as significant components that do not meet the definition but for which disclosures are required under the revised guidance.

Effective Date and Transition

The Board tentatively decided the new guidance would be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application would be permitted and entities would apply the new guidance prospectively.