Alert: FASB Accounting Standards Update No. 2014-08 - Reporting Discontinued Operations and Disclosures of Disposals of components of an Entity

Category: US GAAP

Alert: FASB Accounting Standards Update No. 2014-08 - Reporting Discontinued Operations and Disclosures of Disposals of components of an Entity

On April 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-08 Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The guidance in ASU 2014-08 amends the requirements in FASB Accounting Standards Codification (FASB ASC) 205 Presentation of Financial Statements and FASB ASC 360 Property, Plant and Equipment with respect to the definition of a discontinued operation, the criteria for reporting discontinued operations and expanded disclosures about discontinued operations.

A discontinued operation may include a component or group of components of an entity, or a business or non-profit activity. The revised definition of a discontinued operation is similar to its definition under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In accordance with the new guidance, only disposals that represent a strategic shift that has (or will have) a major effect on the entity’s operations and financial results would qualify as discontinued operations. As noted in the ASU, “examples 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”. Examples of the foregoing are provided in paragraphs 205-20-55-83 to 55-101.

The ASU expands the disclosure requirements for disposals that meet the definition of a discontinued operation to include additional information about classes of assets, liabilities, income, and expenses. In addition, the ASU requires new disclosures for disposals of individually significant components that do not meet the definition of discontinued operations related to pre-tax income (loss) attributable to such components.

The new guidance is effective in the first quarter of 2015 for public companies with calendar year-ends. For most non-public entities, it is effective for annual financial statements with fiscal years that begin on or after December 15, 2014. Early adoption is permitted, but only for disposals, or classifications as held for sale, that have not been reported in financial statements previously issued or available for issuance.

To access the full script of ASU No. 2014-08, click here.

This communication contains a general overview of the topic and is current as of April 10, 2014. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material © MNP LLP 2014. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.