7.12 Restatement of Prior Periods Because of the Disposal of Part of an Operating Segment
ASC 280-10
55-7 If a reportable segment meets the conditions in paragraphs 205-20-45-1A through 45-1G to be reported in discontinued operations, an entity is not required to also disclose the information required by this Subtopic. Paragraph 280-10-55-19 addresses whether there is a need to restate previously reported information if there is a disposal of a component that was previously disclosed as a reportable segment.
55-19 Segment information for prior periods for disposal of a component that was previously disclosed as a reportable segment is not required to be restated. However, if the income statement and balance sheet information for the discontinued component have been reclassified in comparative financial statements, the segment information for the discontinued component need not be provided for those years. Paragraph 280-10-55-7 addresses disclosure requirements if a component of a public entity that is reported as a discontinued operation is a reportable segment.
ASC 280-10-55-7 notes that when the discontinued operation is a reportable segment, an entity is not required to separately disclose information for the discontinued operation within the segment footnote. However, if the discontinued operation is only a component of a reportable segment, the entity should not include the discontinued operation in the disclosures for the reportable segment but should restate prior periods, beginning in the period in which the component is presented as a discontinued operation.
We believe that the failure of a disposal to meet the criteria to be presented as a discontinued operation would not be considered a change in an entity’s internal organization that causes the composition of its reportable segments to change. Accordingly, prior periods would not need to be restated.
Example 7-9
Company A has identified the following reportable segments: computer hardware, computer software, and customer service. Before year-end, A disposed of a portion of its computer hardware segment, and the disposal does not meet the criteria to be presented as a discontinued operation.
In preparing the current-year segment disclosures, A is not required to restate prior-period segment information to remove the portion of the computer hardware segment disposed of before year-end or to quantify the effect in the segment footnote.