5.3 Disposals That Occur Over Multiple Reporting Periods
A component of an entity may be as low a level as an asset group (see
Section 2.3). However, to qualify for
discontinued-operations presentation, the disposal must have a major effect, which
must be quantitatively significant. Sometimes management plans to dispose of a group
of components but those components will qualify as held for sale or will be disposed
of over multiple reporting periods. In such cases, the disposal may represent a
strategic shift in its entirety but the component or components that are disposed of
or classified as held for sale in any individual reporting period may not have a
quantitatively major effect.
We believe that, in such instances, entities may assess, at the time the plan is
formalized, whether the overall plan represents a strategic shift that has or will
have a major effect on an entity’s operations and financial results, provided that
the plan will be executed within a reasonable amount of time. However, we also think
that before reporting any component in discontinued operations, it is appropriate
for entities to wait until the components that are classified as held for sale or
that have been disposed of, in aggregate, have a major effect. Then, the results of
any components that were classified as held for sale or disposed of in prior periods
in accordance with the plan should be reclassified to discontinued operations. We do
not believe that the remaining components should be presented in discontinued
operations until they are classified as held for sale or otherwise disposed of, even
if they are part of the overall plan. Entities should also provide appropriate
disclosures describing the plan.