6.3 Income Statement Presentation for Disposals That Are Not Discontinued Operations
ASC 360-10
45-5 A gain or
loss recognized (see Subtopic 610-20 on the sale or transfer
of a nonfinancial asset) on the sale of a long-lived asset
(disposal group) that is not a discontinued operation shall
be included in income from continuing operations before
income taxes in the income statement of a business entity.
If a subtotal such as income from operations is presented,
it shall include the amounts of those gains or losses.
As noted above, ASC 360-10-45-5 requires that entities present gains or losses
recognized from a sale of a long-lived asset (disposal group) that does not qualify
as a discontinued operation “in income from continuing operations before income
taxes in the income statement.” If a subtotal, such as income from operations or
operating income is presented, it should include such gains or losses.
Diversity in practice has been observed with regard to the presentation of gains
or losses from the sale of disposal groups that meet the definition of a business in
ASC 805-10; entities present the gain or loss within nonoperating income. Entities
should carefully consider their specific facts and circumstances in deciding whether
presentation in nonoperating income is appropriate and should ensure that the
presentation is applied consistently.
See Deloitte’s Roadmap Business Combinations for more
information about determining whether a disposal group meets the definition of a
business.
6.3.1 Income Statement Presentation for Real Estate Investment Trusts
As part of its disclosure update and simplification technical release (DUSTR),
the SEC issued a final rule in August 2018. The final rule deleted SEC
Regulation S-X, Rule 3-15(a)(1), which prescribed guidance on the presentation
of gains and losses related to the sale of properties by REITs, since Rule
3-15(a)(1) conflicted with U.S. GAAP. As a result, REITs now must comply with
the requirements of ASC 360-10-45-5 after November 5, 2018 (i.e., the effective
date of DUSTR). While entities are not required by U.S. GAAP or SEC regulations
to present income from continuing operations before income taxes or a similar
subtotal such as operating income, if a REIT does present such a subtotal, it
should include gains or losses on the sale of properties that do not qualify as
discontinued operations.