7.2 Balance Sheet Presentation of Discontinued Operations
ASC 205-20
45-10 In the period(s) that a
discontinued operation is classified as held for
sale and for all prior periods presented, the
assets and liabilities of the discontinued
operation shall be presented separately in the
asset and liability sections, respectively, of the
statement of financial position. Those assets and
liabilities shall not be offset and presented as a
single amount. If a discontinued operation is part
of a disposal group that includes other assets and
liabilities that are not part of the discontinued
operation, an entity may present the assets and
liabilities of the disposal group separately in
the asset and liability sections, respectively, of
the statement of financial position. If a
discontinued operation is disposed of before
meeting the criteria in paragraph 205-20-45-1E to
be classified as held for sale, an entity shall
present the assets and liabilities of the
discontinued operation separately in the asset and
liability sections, respectively, of the statement
of financial position for the periods presented in
the statement of financial position before the
period that includes the disposal. When an entity
separately presents in prior periods the assets
and liabilities of a discontinued operation, the
entity shall not apply the guidance in paragraph
360-10-35-43 as if those assets and liabilities
were held for sale in those prior periods.
Under ASC 205-20-45-10, in the period in which a component meets the
held-for-sale and discontinued-operations
criteria, an entity must present the assets and
liabilities of the discontinued operation
separately in the asset and liability sections of
the balance sheet. Assets and liabilities cannot
be offset and presented as a single amount. ASC
205-20-45-10 also requires that an entity
reclassify not only the current-period balance
sheet but also any comparative balance sheets
presented. For example, a discontinued operation
that is classified as held for sale and sold in
the same reporting period would be presented as
held for sale in prior-period balance sheets (but
not in the current-period balance sheet).
Similarly, the assets and liabilities of a
discontinued operation that is abandoned in the
current period would be reclassified in the
prior-period balance sheet. “Held for sale” or
“held for disposition” presentation in the prior
periods is appropriate even if the discontinued
operation did not meet the criteria to be
classified as held for sale (or was not yet
disposed of other than by sale) in those prior
periods. Similar presentation in the prior periods
would also be appropriate for the assets and
liabilities to be transferred in a spin-off
transaction, but such presentation would not be
reflected until after the spin-off actually
occurs (see Section
4.4).
ASC 205-20 does not address whether entities should separately present the
assets and liabilities of a discontinued operation
as current and noncurrent. We believe that it is
appropriate to do so and that four balance sheet
captions may result from such presentation (e.g.,
“current assets held for sale,” “noncurrent assets
held for sale,” “current liabilities held for
sale,” and “noncurrent liabilities held for
sale”). In addition, we believe that it is
acceptable for an entity to present the assets and
liabilities of a discontinued operation classified
as held for sale as current in the current-period
balance sheet if it is probable that the sale will
occur, proceeds will be collected within one year,
and the proceeds are not expected to be used to
settle long-term debt. See Section 13.3.3.5 of
Deloitte’s Roadmap Issuer’s Accounting for Debt
for more information about financial statement
presentation related to disposals in which
proceeds will be used to settle long-term debt. We
think that the current and noncurrent
classifications of a discontinued operation’s
assets and liabilities should not change in prior
periods because the noncurrent assets and
liabilities did not meet the criteria for
presentation as current in those prior
periods.
In the period in which a component meets the criteria for presentation in
discontinued operations, the entity must provide detailed information about the
assets and liabilities of the discontinued operation. Therefore, the major classes
of the discontinued operation’s assets and liabilities must be either (1) presented
on the face of the balance sheet in accordance with ASC 205-20-45-11 or (2)
disclosed in the notes in accordance with ASC 205-20-50-5B(e) (see Section 7.8.1).
Such presentation or disclosure must be provided for the discontinued operation in the current
period and all prior periods presented. If the major classes of assets and liabilities of a discontinued
operation are disclosed in the notes, the disclosure must be reconciled to the amounts presented
on the balance sheet, and if the disposal group includes assets or liabilities that are not part of the
discontinued operation, the reconciliation should show them separately from the assets and liabilities of
the discontinued operation. Entities will need to apply judgment in determining what constitutes “major”
with respect to such presentation or disclosure, since ASC 205-20 does not provide guidance on this
topic.
SEC registrants
should also evaluate the reporting considerations discussed in Chapter 8.
Example 7-1
Illustrative Balance Sheet Presentation of a Discontinued Operation
Below is an example of a simplified comparative balance sheet presentation for a component that meets the
criteria to be presented as a discontinued operation in the current period.
See Example 7-7 for an
illustration of the disclosure in the notes to financial statements (see ASC
205-20-50-5B(e)) of the discontinued operation’s major classes of assets and
liabilities classified as held for sale for all periods presented in the statement
of financial position.