B.5 Disclosures
B.5.1 Disclosures by the Receiving Entity
ASC 805-50
50-3 The notes to financial statements of the receiving entity shall disclose the following for the period in which the transfer of assets and liabilities or exchange of equity interests occurred:
- The name and brief description of the entity included in the reporting entity as a result of the net asset transfer or exchange of equity interests
- The method of accounting for the transfer of net assets or exchange of equity interests.
50-4 The receiving entity also shall consider whether additional disclosures are required in accordance with Section 850-10-50, which provides guidance on related party transactions and certain common control relationships.
In addition to the disclosures required by ASC 805-50-50-3 and ASC 850-10-50, if the net assets
transferred result in a change in the reporting entity (see Section B.4.1), the receiving entity must
provide the disclosures required by ASC 250-10-50-6, which states, in part:
When there has been a change in the reporting entity, the financial statements of the period of the change shall
describe the nature of the change and the reason for it. In addition, the effect of the change on income from
continuing operations, net income (or other appropriate captions of changes in the applicable net assets or
performance indicator), other comprehensive income, and any related per-share amounts shall be disclosed
for all periods presented. Financial statements of subsequent periods need not repeat the disclosures required
by this paragraph. If a change in reporting entity does not have a material effect in the period of change but is
reasonably certain to have a material effect in later periods, the nature of and reason for the change shall be
disclosed whenever the financial statements of the period of change are presented.
Changing Lanes
In October 2023, the FASB
issued ASU
2023-06, which modifies the
disclosure or presentation requirements of various
subtopics in the Codification in response to the
SEC’s 2018 final rule that
updated and simplified certain disclosure
requirements. Among other changes, the ASU
enhances the disclosure requirements in ASC
250-10-50-6 so that entities will be required to
provide disclosures that “describe the nature of
the change [in reporting entity] and reason for
it” in the financial statements for both the
interim and annual periods of the change. In
addition, entities will be further required to
disclose the “cumulative effect of the change on
retained earnings or other appropriate components
of equity or net assets in the statement of
financial position as of the beginning of the
earliest period presented.”
For SEC registrants and
entities “required to file or furnish financial
statements with or to the SEC in preparation for
the sale of or for purposes of issuing securities
that are not subject to contractual restrictions
on transfer,” each amendment in the ASU will be
effective on the date on which the SEC removes the
related disclosure requirement from Regulation S-X
or Regulation S-K; early adoption is prohibited.
For all other entities, the amendments will be
effective two years after the date of such
removal. For all entities within the scope of the
affected Codification subtopics, if by June 30,
2027, the SEC has not removed the applicable
requirement from Regulation S-X or Regulation S-K,
the pending content of the associated amendment
will be removed from the Codification and will not
become effective for any entities. Entities should
apply the amendments in ASU 2023-06 prospectively
after the effective dates. For more information,
see Deloitte’s October 12, 2023, Heads Up.
B.5.1.1 Earnings per Share
ASC 805-50
50-2 The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated under the guidance in paragraph 805-50-45-3 but shall be disclosed.
If the receiving entity is required to disclose EPS in its separate financial
statements and presents the common-control transfer as a change in the
reporting entity (see Section B.4.1), earnings-per-share amounts must be recast to
include the earnings (or losses) of the transferred net assets.
B.5.2 Disclosures by the Transferring Entity
ASC 805-50-50 does not include any specific disclosure requirements for the transferring entity. If
the transferring entity accounts for the transferred net assets as a disposal, it should provide the
disclosures required by ASC 360-10-50 for long-lived assets that are disposed of. If the disposal qualifies
for presentation as a discontinued operation from the perspective of the transferring entity, it should
provide the disclosures required by ASC 205-20-50 in its separate financial statements. In addition,
we believe that the transferring entity should provide disclosures sufficient for users of its separate
financial statements to understand the nature of and accounting for the transfer (to the extent that such
disclosures are not required by other GAAP). We believe that the transferring entity should analogize
to the disclosure requirements for the receiving entity in ASC 805-50-50-3, ASC 850-10-50, and
ASC 250-10-50-6.