Bus 353 - Discontinued Operations (Ch. 3)

Front 1

Definition

Back 1

results of operations of a component of an enterprise that has been deposed of or is classified as held for sale. 2 conditions:
-operations and cash flows of component have been (or will be) eliminated from the ongoing operations of enterprise as a result of disposal transaction
and
-enterprise will not have any significant continuing involvement in operations after

Front 2

Component

Back 2

operations and cash flows can be clearly distinguished operationally and for financial reporting purposes from the rest of the enterprise

Front 3

Recognition Criteria

Back 3

-mgmt commits to plan to sell
-assets/liabilities are available for immediate sale
-sale is probable and is expected to be completed w/in 1 year
-selling price is reasonable in relation to current fair value

Front 4

Measurement

Back 4

LT (capital) assets should be measured at lower of carrying value (NBV) and fair value less cost to sell (NRV).
-assets held for sale should not be amortized
-further expected gains or losses should NOT be accrued

Front 5

Presentation

Back 5

I/S: results of disc. ops (net of income taxes) should be reported as a separate element of income or loss before extraordinary items for both CURRENT AND PRIOR periods
*intra-period tax allocation

B/S: assets and liabilities of disc. ops held for sale should be presented separately in asset and liability sections

Front 6

Disclosure

Back 6

-description of facts and circumstances leading to disposal
-expected manner of disposal
-any amt of write-down of LT assets
-amt of revenue and pre-tax profit of disc. op.