In our comment letter on the proposed ASU, Presentation of Financial Statements—Reporting Discontinued Operations, we support the board’s efforts to develop an improved definition of a discontinued operation. Certain stakeholders have expressed concerns that the current guidance results in financial statements that are not decision-useful and are more costly to prepare because too many disposals qualify for discontinued operations presentation. We agree with the board that only disposals representing major strategic shifts in operations should be reported as discontinued operations.
We also believe that dispositions of a major line of business or major geographical area of operations should serve as indicators of a major strategic shift but not as independent criteria. While we agree that the existence of significant continuing involvement with a disposed component should not preclude presentation as a discontinued operation in all cases, we believe that an assessment of the nature and extent of continuing involvement should remain a consideration when evaluating whether a major strategic shift in operations has occurred.
We do not agree, however, with certain of the proposed disclosure requirements, particularly those relating to disposals of individually material components of an entity.