A FASB exposure draft proposes to change the threshold for reporting discontinued operations and add new disclosures that would impact entities across all industries.
What are the key changes proposed?
To be a discontinued operation, a component of an entity must be disposed of or classified as held for sale and be part of a single coordinated plan to dispose of a separate major line of business or a major geographical area of operations. This is expected to result in fewer disposals being reported as discontinued operations.
Having significant continuing involvement with a component after a disposal or failing to eliminate the operations or cash flows of a disposed component from an entity’s ongoing operations would no longer preclude presentation as a discontinued operation. However, having significant continuing involvement would trigger new disclosures.
Information about individually material components that have been disposed of or are held for sale that do not meet the definition of a discontinued operation would need to be disclosed.
An effective date has not yet been decided, but the guidance would be applied prospectively to new disposals (and new classifications as held for sale) occurring in annual and interim periods beginning after the effective date. Early adoption is permitted.
This Dataline outlines the key details of the FASB’s proposal and includes PwC’s insights about how the proposed changes may impact current practice.