Chapter 7 — Presentation and Disclosure Requirements for Disposals That Are Reported as Discontinued Operations

7.8 Disclosures for a Discontinued Operation That Was Not an Equity Method Investment Before Its Disposal

ASC 205-20

50-5A Paragraphs 205-20-50-5B through 50-5D provide disclosures required for discontinued operations that meet the criteria in paragraphs 205-20-45-1B through 45-1C except for a discontinued operation that was an equity method investment before the disposal. For disclosures required for discontinued operations that were equity method investments before the disposal, see paragraph 205-20-50-7.

Entities that dispose of a component that qualifies as a discontinued operation, other than a discontinued operation that was an equity method investment before the disposal, must disclose the information required by ASC 205-20-50-5B through 50-5D to the extent that such information is not presented on the face of its financial statements. See Section 7.9 for the disclosure requirements for an equity method investment that qualifies as a discontinued operation.

ASC 205-20

50-5B An entity shall disclose, to the extent not presented on the face of the financial statements as part of discontinued operations, all of the following in the notes to financial statements:

The pretax profit or loss (or change in net assets for a not-for-profit entity) of the discontinued operation for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity).
The major classes of line items constituting the pretax profit or loss (or change in net assets for a not-for-profit entity) of the discontinued operation (for example, revenue, cost of sales, depreciation and amortization, and interest expense) for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity).
Either of the following:
1. The total operating and investing cash flows of the discontinued operation for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity).
2. The depreciation, amortization, capital expenditures, and significant operating and investing noncash items of the discontinued operation for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity).
If the discontinued operation includes a noncontrolling interest, the pretax profit or loss (or change in net assets for a not-for-profit entity) attributable to the parent for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity).
The carrying amount(s) of the major classes of assets and liabilities included as part of a discontinued operation classified as held for sale for the period in which the discontinued operation is classified as held for sale and all prior periods presented in the statement of financial position. Any loss recognized on the discontinued operation classified as held for sale in accordance with paragraphs 205-20-45-3B through 45-3C shall not be allocated to the major classes of assets and liabilities of the discontinued operation.

50-5C If an entity provides the disclosures required by paragraph 205-20-50-5B(a), (b), and (e) in the notes to financial statements, the entity shall disclose the following:

For the initial period in which the disposal group is classified as held for sale and for all prior periods presented in the statement of financial position, a reconciliation of both of the following:
1. The amounts disclosed in paragraph 205-20-50-5B(e)
2. Total assets and total liabilities of the disposal group classified as held for sale that are presented separately on the face of the statement of financial position. If the disposal group includes assets and liabilities that are not part of the discontinued operation, an entity shall present those assets and liabilities in line items in the reconciliations that are separate from the assets and liabilities of the discontinued operation (see paragraph 205-20-55-102 for an Example).
For the periods in which the results of operations of the discontinued operation are reported in the statement where net income is reported (or statement of activities for a not-for-profit entity), a reconciliation of both of the following:
1. The amounts disclosed in paragraph 205-20-50-5B(a) and (b)
2. The after-tax profit or loss from discontinued operations presented on the face of the statement where net income is reported (or statement of activities for a not-for-profit entity) (see paragraph 205-20-55-103 for an Example).

50-5D For purposes of the reconciliation in paragraph 205-20-50-5C(a) or (b), an entity may aggregate the amounts that are not considered major and present them as one line item in the reconciliation.

7.8.1 Balance Sheet Disclosures for a Discontinued Operation That Was Not an Equity Method Investment Before Its Disposal

In the period in which the discontinued-operations presentation criteria are met and for all comparative periods, the entity must provide detailed information about the major classes of assets and liabilities of the discontinued operation. If the entity does not present the discontinued operation’s major classes of assets and liabilities on the face of the balance sheet in accordance with ASC 205-20-45-10 (see Section 7.2), the entity must disclose such information in the notes in accordance with ASC 205-20-50-5B(e).

ASC 205-20-50-5C(a) also requires that the entity provide a reconciliation of the amounts disclosed in ASC 205-20-50-5B(e) to the amounts in the balance sheet. If the disposal group includes assets or liabilities that are not part of the discontinued operation, those assets should be separately presented in the reconciliation. ASC 205-20-50-5D allows entities to aggregate amounts that are not major into a single line item. ASC 205-20 does not provide any guidance on what constitutes “major” in this context. Accordingly, entities will need to use judgment.

The implementation guidance in ASC 205-20-55-102 illustrates the disclosure requirement in ASC 205-20-50-5C(a).

ASC 205-20

55-102 The table in this illustration provides one example of how to disclose the reconciliation required by paragraph 205-20-50-5C(a).

The following illustration is a continuation of Examples 7-1 and 7-2 and demonstrates how an entity might disclose the reconciliations required by ASC 205-20-50-5C(a).

Example 7-7

Illustration of the Disclosure Requirements in ASC 205-20-50-5C(a)

7.8.2 Income Statement Disclosures for a Discontinued Operation That Was Not an Equity Method Investment Before Its Disposal

In the period in which a component meets the criteria for presentation as a discontinued operation and for all comparative periods, the entity must provide detailed information about the discontinued operation’s pretax profit or loss in accordance with ASC 205-20-50-5B(a) and the major classes of line items constituting pretax profit or loss, including any noncontrolling interest, in accordance with ASC 205-20-50-5B(b) and (d).

ASC 205-20-50-5C(b) also requires that the entity provide a reconciliation of the amounts disclosed in ASC 205-20-50-5B(a) and (b) to the amounts on the face of the income statement. ASC 205-20-50-5D allows entities to aggregate amounts that are not major into a single line item. Again, ASC 205-20 does not provide any guidance on what constitutes “major” with respect to this disclosure requirement, so entities will need to use judgment.

The implementation guidance in ASC 205-20-55-103 illustrates the disclosure requirement in ASC 205-20-50-5C(b).

ASC 205-20

55-103 The table in this illustration provides one example of how to disclose the reconciliation required by paragraph 205-20-50-5C(b).

The following illustration is a continuation of Examples 7-1 and 7-2 and demonstrates how an entity might disclose the reconciliations required by ASC 205-20-50-5C(b).

Example 7-8

Illustration of the Disclosure Requirements in ASC 205-20-50-5C(b)

7.8.3 Cash Flow Disclosures for a Discontinued Operation That Was Not an Equity Method Investment Before Its Disposal

ASC 205-20

50-5B An entity shall disclose, to the extent not presented on the face of the financial statements as part of discontinued operations, all of the following in the notes to financial statements: . . .

c. Either of the following:

1. The total operating and investing cash flows of the discontinued operation for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity)

2. The depreciation, amortization, capital expenditures, and significant operating and investing noncash items of the discontinued operation for the periods in which the results of operations of the discontinued operation are presented in the statement where net income is reported (or statement of activities for a not-for-profit entity). . . .

See Section 3.3 of Deloitte’s Roadmap Statement of Cash Flows for more information.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.