Asc on Discontinued Operations
1. How does the ASC define a component of an entity?
Component of an Entity
A component of an entity comprises operations and cash flows that can be clearly distinguished,
Operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group.
2. Are there any conditions that must be met before a component of an entity can be considered discontinued operations? If so, what are those conditions?
The results of operations of a component of an entity that either has been disposed of or is classified as held for sale under the requirements of paragraph 360-10-45-9, shall be reported in discontinued operations in accordance with paragraph 205-20-45-3 if both of the following conditions are met:
a. The operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction.
b. The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.
The implementation guidance in ASC 205-20-55 provides a model for evaluating the two criteria in
ASC 205-20-45-1 and describes this approach as a four-step process, as follows:
The following steps, presented as questions, may be used to evaluate whether the two conditions of paragraph 205-20-45-1 are met. These steps are also depicted in a flow chart (see paragraph 205-20-
55-25 [not included in this publication]). The steps are as follows:
Step 1: Are continuing cash flows expected to be generated by the ongoing entity?
Step 2: Do the continuing cash flows result from a migration or continuation of activities?
Step 3: Are the continuing cash flows significant?
Step 4: Does the ongoing entity have significant continuing involvement in the operations of the disposed component?
3. Would recommend reporting
Component of an Entity
A component of an entity comprises operations and cash flows that can be clearly distinguished,
Operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group.
2. Are there any conditions that must be met before a component of an entity can be considered discontinued operations? If so, what are those conditions?
The results of operations of a component of an entity that either has been disposed of or is classified as held for sale under the requirements of paragraph 360-10-45-9, shall be reported in discontinued operations in accordance with paragraph 205-20-45-3 if both of the following conditions are met:
a. The operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction.
b. The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.
The implementation guidance in ASC 205-20-55 provides a model for evaluating the two criteria in
ASC 205-20-45-1 and describes this approach as a four-step process, as follows:
The following steps, presented as questions, may be used to evaluate whether the two conditions of paragraph 205-20-45-1 are met. These steps are also depicted in a flow chart (see paragraph 205-20-
55-25 [not included in this publication]). The steps are as follows:
Step 1: Are continuing cash flows expected to be generated by the ongoing entity?
Step 2: Do the continuing cash flows result from a migration or continuation of activities?
Step 3: Are the continuing cash flows significant?
Step 4: Does the ongoing entity have significant continuing involvement in the operations of the disposed component?
3. Would recommend reporting