By Tom Wilson, CPA
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-08 – Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update applies to all entities. The FASB determined that too many disposals of small groups of assets that are recurring in nature qualify for discontinued operations presentation under the previous guidance.
The amendments in this Update improve the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represents strategic shifts that have (or will have) a major effect on an entity’s operations and financial results and when one of the following occurs: the component of the entity is either sold, held for sale or disposed of by other than sale. Examples of strategic shifts that have (or will have) a major effect on an entity’s operations and financial results could include a disposal of a major geographical area or a major line of business.
The amendments in this Update also require expanded disclosures of the assets, liabilities, revenues, and expenses of discontinued operations. Additionally, the updated amendments also require an entity to disclose the pretax profit or loss (or change in net assets for a not-for-profit entity) of an individually significant component of an entity that does NOT qualify for discontinued operations reporting.
The update, for the most part, is effective prospectively within annual periods beginning on or after December 15, 2014. Early adoption is permitted, but only for disposal (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance.
If you have any questions on this update, feel free to contact us.
Volume 2, Issue 1