FASB Redefines Discontinued Operations
The Financial Accounting Standards Board (FASB) issued final guidance changing the criteria for reporting discontinued operations; only those disposals representing a strategic shift in operations with a major effect on the organization’s operations and financial results are now required to be reported. With the issuance of ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360), the number of disposals qualifying as discontinued operations is expected to decrease, increasing the relevance of information about disposals that do qualify as discontinued operations. The standard requires expanded disclosures for discontinued operations as well as new disclosures for individually material disposal transactions not meeting the definition of a discontinued operation. The standard allows an alternative for disclosing cash flows on discontinued operations, reflecting reduced and simplified disclosure requirements from the initial proposal. In addition, the standard eliminates the condition under U.S. generally accepted accounting principles (GAAP) requiring organizations not to have significant continuing involvement in the operations of the component after the disposal transaction.
The guidance prospectively applies to all new disposals and new classifications of disposal groups as held for sale after the effective date. For public business entities (and certain not-for-profit entities that issue securities or are conduit bond obligors), the standard is effective for annual periods beginning on or after December 15, 2014, and interim periods within that year. The standard is effective for all other entities for annual periods beginning on or after December 15, 2014, and interim periods beginning on or after December 15, 2015. Entities may choose early adoption for new disposals or new classifications as held for sale beginning in the first quarter of 2014, provided the entity has not issued or made its financial statements available for issuance.