3.9 Changes to a Plan of Sale
ASC 360-10
Changes to a Plan of Sale
35-44 If circumstances arise that previously were considered unlikely and, as a result, an entity decides not to sell a long-lived asset (disposal group) previously classified as held for sale, the asset (disposal group) shall be reclassified as held and used. A long-lived asset that is reclassified shall be measured individually at the lower of the following:
- Its carrying amount before the asset (disposal group) was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the asset (disposal group) been continuously classified as held and used
- Its fair value at the date of the subsequent decision not to sell.
35-45 If an entity removes an individual asset or liability from a disposal group previously classified as held for sale, the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the criteria in paragraph 360-10-45-9 are met. Otherwise, the remaining long-lived assets of the group shall be measured individually at the lower of their carrying amounts or fair values less cost to sell at that date.
45-10 If at any time the criteria in [ASC 360-10-45-9] are no longer met (except as permitted by [ASC 360-10-45-11]), a long-lived asset (disposal group) classified as held for sale shall be reclassified as held and used in accordance with paragraph 360-10-35-44.
ASC 205-20
45-1F If at any time the criteria in paragraph 205-20-45-1E are no longer met (except as permitted by paragraph 205-20-45-1G), an entity to be sold that is classified as held for sale shall be reclassified as held and used and measured in accordance with paragraph 360-10-35-44.
If, at any time, the held-for-sale criteria are no longer met, the disposal
group should be reclassified as held and
used and
each long-lived asset should be measured individually, in accordance with ASC
360-10-35-44, at the lower of:
-
“Its carrying amount before the asset (disposal group) was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the asset (disposal group) been continuously classified as held and used.”
-
“Its fair value at the date of the subsequent decision not to sell.”
The need to measure a long-lived asset individually (as opposed to as a group as may
have been done when the assets were originally classified as held for sale) may
result in an additional impairment on an individual long-lived asset that was
previously included in the broader disposal group if the individual asset’s fair
value is less than its carrying amount adjusted for depreciation.
In addition, as of the date on which the held-for-sale criteria are no longer
met, the statement of financial position and notes to the financial statements
should no longer separately identify the assets and liabilities of the disposal
group as held for sale, and any amounts that had been reported in discontinued
operations should be reclassified to continuing operations for all periods
presented.
In some cases, an entity may decide to retain an asset or liability that it had
previously determined to be part of a disposal group classified as held for sale.
ASC 360-10-35-45 states, in part, that “[i]f an entity removes an individual asset
or liability from a disposal group previously classified as held for sale, the
remaining assets and liabilities of the disposal group to be sold shall continue to
be measured as a group only if the [held-for-sale criteria] are met.” If the
remaining assets are no longer part of a single disposal group but the remaining
assets still qualify as held for sale (e.g., because plans still exist to sell them
individually), in a manner consistent with that premise, the remaining assets would
be measured individually (as opposed to as a disposal group) at the lower of their
carrying amounts or fair values less cost to sell.
Example
3-7
Company C has a wholly owned subsidiary, Subsidiary D. Subsidiary D represents a
component of C. Company C plans to dispose of D in its
entirety and, at the end of the first quarter, C determines
that D meets the criteria to be classified as held for
sale.
In the third quarter, C decides to retain certain fixed assets of D while
continuing to pursue a disposal of D’s remaining net assets
and operations. Company C concludes that the remaining
assets of D to be sold continue to constitute a disposal
group that meets the criteria to be classified as held for
sale and remeasures them (if necessary) at the lower of
carrying value or fair market value less cost to sell. In
accordance with ASC 360-10-45-10, C reclassifies to assets
held and used the fixed assets it no longer seeks to dispose
of and measures those fixed assets individually at the lower
of (1) their carrying amounts before being classified as
held for sale less depreciation expense that would have been
recognized if they had not been classified as held for sale
or (2) the fair value as of the date of the subsequent
decision not to sell.