The FASB’s proposed changes to the reporting of discontinued operations would apply to all public and private companies and not-for-profit organizations. The main changes include a narrowing of the definition of a discontinued operation, an expansion of the scope to include equity method investments, and the addition of incremental disclosure requirements.
The changes would affect entities across all industries but particularly those that routinely divest components of their businesses. For example, entities in the real estate, retail, and financial services industries often have individual properties that constitute components with the result that they must report the sales of those properties as discontinued operations under current US accounting standards. Examples include individual office parks, single stores or bank branches.
Basically, the expectation is that the proposed changes would result in fewer items being treated as discontinued operations and more disclosures. One of the main challenges likely to arise, if the proposed guidance is adopted, would be how to determine whether a disposal of a component represents a disposal of a major line of business or a major geographic area of operations.
This MHM Messenger summarizes the proposed changes.
If you have questions about the proposed changes, please contact your local Mayer Hoffman McCann office or Andy Burczyk of MHM’s Professional Standards Group.