FASB ISSUES GUIDANCE TO IMPROVE FINANCIAL REPORTING OF DISCONTINUED OPERATIONS
Accounting Standards Update No. 2014-08, Presentation of Financial
Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):
Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity, changes the criteria for reporting
discontinued operations while enhancing disclosures in this area. It
also addresses sources of confusion and inconsistent application related
to financial reporting of discontinued operations guidance in U.S.
Norwalk, CT, April 10, 2014—The Financial Accounting Standards Board (FASB) today issued guidance
that improves U.S. Generally Accepted Accounting Principles (GAAP) by
more faithfully representing when a company or other organization
discontinues its operations.
"This Update addresses concerns expressed by our stakeholders that too
many disposals of assets—including small groups of assets that are
recurring in nature—qualify for discontinued operations presentation,"
stated FASB Chairman Russell G. Golden. "By revising the criteria for
reporting a discontinued operation, the Board anticipates that the
Update will result in more decision-useful financial reporting for
investors while eliminating an unnecessary source of cost and complexity
Under the new guidance, only disposals representing a strategic shift in
operations should be presented as discontinued operations. Those
strategic shifts should have a major effect on the organization´s
operations and financial results. Examples include a disposal of a
major geographic area, a major line of business, or a major equity
Additionally, the new guidance requires expanded disclosures about
discontinued operations that will provide financial statement users with
more information about the assets, liabilities, income, and expenses of
The new guidance also requires disclosure of the pre-tax income
attributable to a disposal of a significant part of an organization that
does not qualify for discontinued operations reporting. This disclosure
will provide users with information about the ongoing trends in a
reporting organization´s results from continuing operations.
The amendments in this Update enhance convergence between U.S. GAAP and
International Financial Reporting Standards (IFRS). Part of the new
definition of discontinued operation is based on elements of the
definition of discontinued operations in IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations.
The new standard is effective in the first quarter of 2015 for public
organizations with calendar year ends. For most nonpublic
organizations, it is effective for annual financial statements with
fiscal years beginning on or after December 15, 2014.
The new guidance, and a FASB in Focus document that provides a high-level overview of the guidance, are available at www.fasb.org.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the
designated organization in the private sector for establishing standards
of financial accounting and reporting. Those standards govern the
preparation of financial reports and are officially recognized as
authoritative by the Securities and Exchange Commission and the American
Institute of Certified Public Accountants. Such standards are essential
to the efficient functioning of the economy because investors,
creditors, auditors, and others rely on credible, transparent, and
comparable financial information. For more information about the FASB,
visit our website at www.fasb.org.