3.10 Consideration of Subsequent Events for Assessing Held-for-Sale Classification
ASC 360-10
45-13 If the criteria in paragraph 360-10-45-9 are met after the balance sheet date but before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25), a long-lived asset shall continue to be classified as held and used in those financial statements when issued or when available to be issued. In addition, information required by paragraph 205-20-50-1(a) shall be disclosed in the notes to financial statements. If the asset (asset group) is tested for recoverability (on a held-and-used basis) as of the balance sheet date, the estimates of future cash flows used in that test shall consider the likelihood of possible outcomes that existed at the balance sheet date, including the assessment of the likelihood of the future sale of the asset. That assessment made as of the balance sheet date shall not be revised for a decision to sell the asset after the balance sheet date. Because it is difficult to separate the benefit of hindsight when assessing conditions that existed at a prior date, it is important that judgments about those conditions, the need to test an asset for recoverability, and the application of a recoverability test be made and documented together with supporting evidence on a timely basis. An impairment loss, if any, to be recognized shall be measured as the amount by which the carrying amount of the asset (asset group) exceeds its fair value at the balance sheet date.
ASC 360-10-45-13 states that if the held-for-sale criteria “are met after the
balance sheet date but before the financial statements are issued or
are available to be issued” (as discussed in ASC 855-10-25), the
long-lived asset (or disposal group) is “classified as held and used
in those financial statements when issued or when available to be
issued.” This paragraph further indicates that an entity should
disclose the information required by ASC 205-20-50-1(a) in the notes
to financial statements. If a component either meets the
held-for-sale criteria or is disposed of “after the balance sheet
date but before the financial statements are issued or are available
to be issued,” entities should also consider the disclosure
requirements in ASC 855-10-50 related to nonrecognized subsequent
events.
While ASC 205-20 does not include similar guidance, we believe that entities
should apply it to disposal groups that qualify for
discontinued-operations reporting. Similarly, we think that if the
held-for-sale criteria are met before the balance sheet date but are
no longer met when the financial statements are issued or are
available to be issued, the disposal group should be classified as
held for sale in the financial statements. We also believe that an
entity should consider providing the disclosures in ASC 205-20-50-3
(see Section
7.7.1) about its change in plan. See Section
3.9 for guidance on the accounting in situations
in which an entity has a change in its plan of sale.
Further, ASC 360-10-45-13 goes on to say that “[i]f the asset (asset
group) is tested for recoverability (on a held-and-used basis) as of
the balance sheet date, the estimates of future cash flows used in
that test shall consider the likelihood of possible outcomes that
existed at the balance sheet date, including the assessment of the
likelihood of the future sale of the asset. That assessment made as
of the balance sheet date shall not be revised for a decision to
sell the asset after the balance sheet date” (see Section
2.4.2).