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Project Update
FAS 144—Reporting Discontinued Operations—Joint Project of the IASB and FASB
Last updated on July 29, 2010. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Updated sections are indicated with an asterisk *)
This project update summarizes the project activities and decisions of the IASB and the FASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.
Project Objective
Due Process
Decisions Reached at the Last Meeting
*Summary of Decisions Reached to Date
Next Steps
Board/Other Public Meeting Dates
Background Information
Contact Information
Project Objective
The objective of this project is to develop a converged definition of a discontinued operation with the IASB along with converged disclosure requirements for all components of an entity that have been (or will be) disposed of.
Due Process
On September 25, 2008, the FASB issued an Exposure Draft, Amending the Criteria for Reporting a Discontinued Operation, for a 120-day comment period. The comment period ended on January 23, 2009.
As part of this joint project, the IASB also issued an Exposure Draft, Discontinued Operations, which proposes amendments to IFRS 5 to parallel those proposed in the FASB Exposure Draft. The comment period ended on January 23, 2009.
Decisions Reached at the Last Meeting (February 3, 2010)Scope of Discontinued Operations
The Board discussed the scope of a proposed Accounting Standards Update on FASB Accounting Standards Codification™ Subtopic 205-20, Presentation of Financial Statements—Discontinued Operations. The Board decided to eliminate the existing exceptions to the scope of Subtopic 205-20. The Board believes that change will have little practical effect on most reporting entities, except for requiring an entity to consider whether the disposal of an equity method investment should be reported and disclosed as a discontinued operation. The Board noted that eliminating those scope exceptions will simplify U.S. GAAP requirements while promoting convergence of those requirements and IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.
Comment Period
The Board decided on a 60-day comment period for the proposed Accounting Standards Update. The Board directed the staff to draft the proposed Update for vote by written ballot.
The Boards made the following decisions during redeliberations of the Exposure Drafts:
Presentation
The Boards decided that discontinued operations should continue to be presented in a separate section on the face of an entity's financial statements.
Definition of a discontinued operation
The Boards decided that a discontinued operation is a component that has either been disposed of, or is classified as held for sale, and
- Represents a separate major line of business or major geographical area of operations,
- Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or
- Is a business that meets the criteria in paragraph 360-10-45-9 to be classified as held for sale on acquisition.
Disclosure
The Boards decided on modifying the disclosure requirements for discontinued operations as follows:
Disposal of a component of an entity that meets the definition of a discontinued operation
An entity would provide the following disclosures about a disposal of a component of an entity that meets the definition of a discontinued operation for current and prior periodsperiods presented in the financial statements:
- The major income and expense items constituting the profit or loss from a discontinued operation
- The major classes of cash flows (operating, investing, and financing) of the discontinued operation
- If the discontinued operation includes a non-controlling interest, the profit or loss attributable to the parent
- A reconciliation of the major classes of assets and liabilities of the discontinued operation classified as held for sale that are disclosed in the notes to the financial statements to total assets and total liabilities of the discontinued operation classified as held for sale that are presented separately on the face of the statement of financial position
- A reconciliation of the major income and expense items from the discontinued operation that are disclosed in the notes to the financial statements to the after-tax profit or loss from discontinued operations presented on the face of the income statement.
Disposal of a component of an entity that does not meet the definition of a discontinued operation
An entity would provide the following disclosures about a disposal of a significant component of an entity that does not meet the definition of a discontinued operation for current and prior periods:
- The pre-tax profit or loss attributable to the component of an entity for current and prior periods
- If the component includes a non-controlling interest, the profit or loss attributable to the parent
- A reconciliation in the notes to the financial statements of the major classes of assets and liabilities of the component of an entity classified as held for sale to total assets and total liabilities of the component of an entity classified as held for sale that are presented separately on the face of the statement of financial position.
Disposals of long-lived assets that are not components of an entity
If major classes of assets and liabilities included as part of the disposal group are not presented separately in the statement of financial position, the entity would disclose those classes of assets and liabilities in the notes to the financial statements. Additionally the entity would reconcile the amounts provided in the notes to the financial statements to total assets and total liabilities classified as held for sale that are presented separately in the statement of financial position, respectively.
Continuing involvement and continuing cash flows
If an entity retains continuing involvement with the discontinued operation and/or continuing cash flows between the discontinued operation and the remaining entity after the disposal date, the entity would provide the following disclosures:
- The nature of the activities that give rise to continuing involvement and/or cash flows
- The period of time for which the continuing involvement and/or cash flows is expected to continue
- The amount of the continuing cash flows, if applicable;
- The amounts presented in continuing operations after the disposal transaction that prior to the disposal transaction were eliminated in consolidated financial statements as intra-entity transactions.
The Board decided on a 60-day comment period for the proposed Accounting Standards Update.
Next Steps
The Boards decided that the proposed guidance would be re-exposed. The Boards directed the staff to proceed to the draft of the Exposure Draft for vote by written ballot.
Board/Other Public Meeting Dates
The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
| February 3, 2010 | FASB Board Meeting—Scope of proposed Accounting Standards Update on FASB Accounting Standards Codification™ Subtopic 205-20, Presentation of Financial Statements—Discontinued Operations |
| December 17, 2009 | Joint FASB and IASB Board Meeting—Definition and Disclosures of a Discontinued Operation |
| October 26, 2009 | Joint FASB and IASB Board Meeting—Alternatives for a definition of a discontinued operation |
| August 26, 2009 | FASB Board Meeting—Discussion of the user feedback received |
| July 21, 2009 | IASB Board Meeting—The way forward with the project |
| July 23, 2008 | Board Meeting—Board directed the staff to proceed to a draft of a proposed FSP |
| May 14, 2008 | Board Meeting—Decisions related to the definition of Discontinued Operations, required disclosures for all components of an entity that have been (or will be) disposed of, effective date and transition, and proposed FSP comment period |
| April 18, 2007 | Board Meeting—Agenda Decision |
| January 24, 2007 | Board Meeting—Financial Statement Presentation: Discontinued Operations |
Background Information
At its January 24, 2007 meeting on the financial statement presentation project, the Board agreed to revise the definition of a discontinued operation in FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. It also decided to require an entity to provide additional disclosures when reporting the disposal (or future disposal) of a component of the entity. At the January 25, 2007 IASB Board meeting, the IASB agreed to converge with the FASB’s revised definition of a discontinued operation.
During the deliberations leading to the revised definition, the Board asked the staff to research the amount of the staff’s and the Board’s time necessary to create a separate project for this issue, effectively removing it from the scope of the financial statement presentation project. In February 2007, the staff received six letters from constituents, including NAREIT, in support of the revised definition and asked the IASB and the FASB to issue the revised guidance on an accelerated basis. In April 2007, the FASB and IASB Boards agreed to address the guidance for reporting discontinued operations and any related disclosure issues separately from the financial statement presentation project.
Contact Information
Phil Hood
Project Manager
prhood@fasb.org