Approach #1 treats the whole subsidiary X, i.e. Some stakeholders felt that too many disposals, including routine disposals of small groups of assets, qualified for discontinued operations presentation under the previous guidance. occurrence of discontinued operations after year‐end, or as a result of a change in segment reporting after year‐ end.1 The Staff indicates that revised financial statements, as well as affected disclosures, must be on file for incorporation by reference into a Form S‐3 prior Operating segments 18 6. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). in the split between continuing (13 000) and discontinued (7 000) operation. Prior to 2002, the rules for discontinued operations were described in Accounting Principles Bulletin (APB) 30. Paragraph IFRS 5.31 further clarifies that a component of an entity will have been a CGU while being held for use or a separate subsidiary (IFRS 5.36A). Disclose the results from discontinued operations … Functional and presentation currency 16 4. The advantage of this approach is that it faithfully presents results of both operations. January 2016 IFRIC update discusses presentation of intragroup transactions between continuing and discontinued operations. Income and expenses 27 9. We use data from the year before to ensure that we capture a full year of pre-tax income for the discontinued operation. The guidance in ASC 205-20-45-10, Presentation of Financial Statements: Discontinued Operations, states that: “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.”. Additionally, net cash flows attributable to the operating, investing and financing activities of discontinued operations should also be disclosed (IFRS 5.33(c)). Here are the Discontinued operations is an accounting term that refers to parts of a company’s core business or product line that have been divested or shut down. P/L for prior periods should be restated so that all operations that have been classified as discontinued by the end of the current reporting period are presented according to IFRS 5 requirements (IFRS 5.34). This line includes also the impact of the measurement to fair value less costs to sell or of the disposal of the assets/disposal group constituting the discontinued operation (IFRS 5.33(a)). Disclose the results from discontinued operations on the income statement or in accompanying notes. We start with an overview of the purpose of discontinued operations presentation and why it’s meaningful to users of the financial statements. Discontinued Operations Under GAAP . a. In addition, the Company has presented earnings before income from discontinued operations, net of taxes, interest, taxes, depreciation and amortization and … When a change in depreciation method occurs: a. prior years' financial statements should be changed to reflect the newly adopted method. X –  a subsidiary of the group A, Note: you can scroll the table horizontally if it doesn’t fit your screen. Prior year balances in the statement of financial positions are … There is a group A containing a subsidiary X, which at some point is classified as a discontinued operation under IFRS 5. 3. Discontinued Operations Accounting summary 2017 - 04 1 Objective The objective of this IFRS is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. There must be a single amount on the face of the statement of comprehensive income (or income statement) for the total of: 1. the post-tax profit or loss for the period from the discontinued operations, and 2. the post-tax gain or loss on disposal (based on the fair value minus costs to sell of the asset or disposal group). 6.2.1 Requirements of FRS 102 An entity shall also disclose on the face of the income statement (or statement of comprehensive income if presented) an amount comprising the total of: (a)the post-tax profit or loss of discontinued operations; and A discontinued operation is a part of an entity that has either been disposed of or is classified as held-for-sale, and: 1. represents a separate major line of business or geographical area of operations 2. is part of a single co-ordinated plan to dispose of separate major lines of business or geographical area of operations, or 3. the subsidiary was acquired exclusively with a view to resale. Events after the reporting period 224 57. Revenue and expenses of A and X are given in the table below. Information about discontinued operations (both discontinued and “held for sale”) must be presented in the statement of comprehensive income or in a note to the financial statements. Presentation ZETA COMPANY Income Statement Year ended December 31, 2013 Sales Cost of sales Gross income Expenses 000, 000) Income before tax 500, 000 Income tax expense Income from continuing operations Income from discontinued operation, net of tax 510, 000 Net Income 5, 000, 000 (2, 500,000) 2, 500, 000 (1, 1, (480,000) 1, 020, 000 1, 530, 000 A discontinued operation is a component of an entity that (IFRS 5.32): IFRS 5 sets out specific requirements for presentation and disclosure of discontinued operations. This pronouncement established formal reporting requirements for various events, including the effects of a disposal of a business segment. The disadvantage of this approach is that it does not faithfully present results of both operations. A company may report discontinued operations under GAAP as long as two conditions are met. But sometimes businesses sell (or retire) a product line, asset group or another component. In April 2014, FASB issued Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which is effective for fiscal years beginning after December 15, 2014. However, if it is probable that a sale will occur within one year of when the assets or liabilities meet the held-for-sale criteria and the sale is expected to qualify for recognition as a completed sale, we believe that it is appropriate to classify all assets and liabilities of a discontinued operation as current in the current-period balance sheet when the determination of held-for-sale is met, even though they were classified as noncurrent in prior periods. c. the cumulative effect of the change should be reflected on the income statement as of the beginning of the next year. Fair presentation in accordance with GAAP is accomplished by: ... Fiscal years beginning on or after January 1, 20112 Financial statements are prepared on a ... except for losses associated with discontinued operations that are included in the results of discontinued operations. . IFRScommunity.com is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. additional catch-up depreciation) are included in current year P/L of continuing operations (IFRS 5.28). 6.2 Presentation of discontinued operations . Those assets and liabilities did not meet the held-for-sale criteria in the prior periods, even though the held-for-sale criteria was subsequently met, and they are presented as current assets and liabilities in the current balance sheet. For full functionality of this site it is necessary to enable JavaScript. ... Events or circumstances may extend the period to complete the sale beyond one year… The guidance, found in Accounting Standards Update (ASU) 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, is intended to help ensure that financial statements faithfully represent a company’s discontinuation of operations while reducing … reclassify these assets and liabilities on the prior-year balance sheet to conform prior-year balance. A – the whole group except X In contrast, prior comparative periods would not be recast to reflect as current all of the assets and liabilities of a now discontinued operation. But sometimes businesses sell (or retire) a product line, asset group or another component. Use of judgements and estimates 16 Performance for the year 18 5. Use at your own risk. The entity didn’t have any significant continuing involvement in the operations of the component after the disposal transaction. Discontinued operation 25 7. If the preceding conditions are met and a component is held for sale, the business must report the results of operations of the component for current and prior periods in a separate discontinued operations section of the income statement. in loss from discontinued operations, were $656 thousand, and $2.588 million in 2017 and 2016, respectively. Commitments 222 55. If that’s the case, then you should present 2015 exactly as the last year, i.e. [IAS 35.29] What to disclose. Its primary effect is to tighten the requirements for treating the disposal of a component of a business as a discontinued operation. A company's income statement summarizes the revenues, expenses and profits for an accounting period. In effect, the line presenting discontinued operations includes intragroup revenue earned by X. Consequently, continuing operations of group A include intragroup expenses incurred with X. Disposal of Long-Lived Assets and Discontinued Operations ASPE: 3475 Disposal of Long-Lived Assets and Discontinued Operations ASPE: 3475 Scope This section does not apply to the following assets:the disposal of goodwillinvestments, including equity method accounted investmentsfinancial assets, financial liabilities Definition A disposal group is a group of assets to be… Under the same conditions but where the component has been sold, the business must report the results of operations of the component for current and prior periods… If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations are reclassified and included in income from continuing operations for all periods presented (IFRS 5.36). Financial reporting generally focuses on the results of continuing operations. Treat expenses and losses as negative numbers. See page 45 and Notes 2, 3 and 11 for a full explanation. 46. In certain situations, such a disposal should be reported as a discontinued operation under U.S. Generally Accepted Accounting Principles (GAAP). Post them on our Forum, Presentation and disclosure of discontinued operations, Intragroup transactions with discontinued operations, subsidiary acquired exclusively with a view to resale, has been disposed of, or is classified as. Net finance costs 29 10. Discontinued Operations is the total amount of net income attributable to discontinued operations (Xpressfeed DO) in year t scaled by common equity as of the beginning of year t. RegimeShift is an indicator variable that is equal to zero for fiscal years 1995–2000 and one for 2002–2007. Earnings per share 30 Employee benefits 32 11. Net finance costs 29 10. Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement. Presentation and Disclosure. The guidance in ASC 205-20-45-10, Presentation of Financial Statements: Discontinued Operations, states that: “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.”. This Roadmap combines the guidance in ASC 360-10 and ASC 205-20 on classifying long-lived assets as held for sale — as well as that on the presentation of disposals that both do and do not qualify for discontinued-operations reporting — with Deloitte’s interpretations and examples in a comprehensive, reader-friendly format. Our white paper, Discontinued operations: Identification, presentation and disclosure, provides detailed discussion and examples related to application of the discontinued operations guidance in Subtopic 205-20, Presentation of Financial Statements – Discontinued Operations, of the FASB’s Accounting Standards Codification. The standard was a result of stakeholders informing the FASB that too many disposals qualify for discontinued operations presentation, including routine disposals of small groups of assets. Presentation and disclosure of discontinued operations. A non-current asset (or disposal group) shall be classified as held for sale when its carrying amount will be recovered principally through a sale transaction rather than through continuing use. 1 The KPMG Guide: FRS 2, Share-based Payment and FRS 5, Non-current Assets Held for Sale and Discontinued Operations b) an extraordinary item. In this example, add $50,000 in income and the -$10,000 tax expense to get $40,000 in income from discontinued operations, net of taxes. A breakdown of this one line needs to be provided, and usually it is provided in the notes (IFRS 5.33(b) and (d) and EPS in IAS 33.68). 13110.6 Form 10-K/A ordinarily should not be used to file retrospectively revised financial statements that reflect a subsequent change in accounting principle, discontinued operations or change in segment presentation. 0:37: Discontinued operations—overview. This line includes also the impact of the measurement to fair value less costs to sell or of the disposal of the assets/disposal group constituting the discontinued operation (IFRS 5.33(a)). Operating EBITDA was $1.4 billion, flat with pro forma operating EBITDA (1) in the prior year. Definitions of headline metrics, and information about the adjustments to statutory measures, are provided in note 3 to the financial statements 2FY2018 has been restated for IFRS 15 and the Smiths Medical reclassification as discontinued operations 3Underlying modifies headline performance to adjust prior year to reflect an equivalent period of ownership for divested businesses an… The profit for the year from discontinued operations is fully attributable to the equity holders of the company. 3. 1Headline: In addition to statutory reporting, the Group reports on a headline basis except for balance sheet and cash-flow. First, the … Revenue 26 8. 3 Underlying modifies headline performance to adjust prior year to reflect an equivalent period of ownership for divested businesses, excludes the effects of foreign exchange and acquisitions, and adds back the depreciation and amortisation of discontinued operations for comparability purposes. In 2016, inventory for discontinued operation will be 0. Group’s reported financial data for the current and prior years into “continuing” “discontinued” and operations. Functional and presentation currency 16 4. Discontinued operation 25 7. Discontinued operations include income from operations of the discontinued segment plus a gain or loss on disposal. The post-tax profit or loss of discontinued operations is presented as a single amount in the P/L and OCI. Financial reporting generally focuses on the results of continuing operations. When a change in depreciation method occurs a. prior years' financial statements should be changed to reflect the newly adopted method. c. In particular, the IFRS requires assets that meet the … 58. Question: Execucomp Corporation S Financial Statements In The Current Year Show A Loss From Discontinued Operations, A Prior Period Adjustment, And An Extraordinary Gain. Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period should also be classified separately as discontinued operations. While the new U.S. GAAP definition of discontinued operations is closer to IFRS guidance, the standards are not converged.2 Group’s reported financial data for the current and prior years into “continuing” “discontinued” and operations. However, the guidance in ASC 205-20 does not address: When a discontinued operation is classified as held-for-sale, we believe that, subject to the following discussion, those existing classifications should continue but should be condensed into four balance-sheet line items: current assets held-for-sale, noncurrent assets held-for-sale, current liabilities held-for-sale, and noncurrent liabilities held-for-sale. Entities may want to provide additional information in the notes that would highlight the impact of intragroup transactions between continuing and discontinued operations. A board decision after year-end, by itself, is not enough. ... so the disclosures relating to discontinued operations in the prior period relate to all discontinued operations up to the current period. This pronouncement established formal reporting requirements for various events, including the effects of a disposal of a business segment. The standard was published in March 2004 and is effective from 1 January 2005. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations specifies the accounting for assets held for sale and presentation and disclosure of discontinued operations. in the split between continuing (13 000) and discontinued (7 000) operation. Entities sometimes intend to sell their long-lived assets and/or their operations. Note the restatement of prior-year results to conform with current year presentation. 3:44: Held-for-sale—overview. And now, in 2016, you don’t have any discontinued operation as it’s gone, so you’re asking how to present 2015? For official information concerning IFRS Standards, visit IFRS.org. IFRIC did not issue any interpretation, but it noted that IFRS 5 cannot override consolidation requirements of IFRS 10, therefore Approach #2 from the example above should be adopted. b. the change should be reported in current and future years. You can contact us via kgt@pr.gt.com. Profit for the year 204 48. Such events include reporting a discontinued operation, a change in reportable segments, or a change in accounting principle for which retrospective application is either required or elected. GAAP Income (loss) from continuing operations totaled $(1.1 billion), versus pro forma GAAP Income (loss) from continuing operations of $(11) million in the year-ago period. A discontinued operation is a separate major business division or geographical operation that the company has disposed of or is holding for sale. 58. In 2016, inventory for discontinued operation … Examples of long-lived assets include: property, plant and equipment. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Acquisition of subsidiary 214 52. b. the change should be reported in current and future years. c) an amount after continuing operations. Operating lease arrangements 222 56. The total of the post-tax profit or loss of the discontinued operation, and the post-tax gain or loss recognised on the measureme… Next, we explain the effects of these assumptions in greater detail (we learned the prior period adjustment earlier but will review its presentation here). Disposal of subsidiary 212 51. Examples of such adjustments are given in paragraph IFRS 5.35. Our financial reporting guide, Financial statement presentation, details the financial statement presentation and disclosure requirements for common balance sheet and income statement accounts.It also discusses the appropriate classification of transactions in the statement of cash flows, and addresses the requirements related to the statements of stockholders’ equity and other … A discontinued operation is a separate major business division or geographical operation that the company has disposed of or is holding for sale. As a result, only transactions with external parties of X are presented as a discontinued operation. Starting in 2015, the rules changed, limiting the scope of … © 2020 Kevane Grant Thornton. The held-for-sale impairment model is critical to assessing discontinued operations. Discontinued Operations Accounting summary 2017 - 04 1 Objective The objective of this IFRS is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. Component of an entity is defined as operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity (IFRS 5.Appendix A). In certain situations, such a disposal should be reported as a discontinued operation under U.S. Generally Accepted Accounting Principles (GAAP). At the same time, the profitability of the rest of group A is overstated, because it does not take into account contribution made by X in earning the revenue. In IFRS, the guidance related to noncurrent assets held for sale and discontinued operations is included in IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. Company C has income from continuing operations of USD 700 million. 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