Source: Grant Thornton, On the Horizon, September 14, 2017. [IAS 35.29] What to disclose. 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. The total amoun… Example: Treatment of intragroup transactions with discontinued operations. in the split between continuing (13 000) and discontinued (7 000) operation. 3. And now, in 2016, you don’t have any discontinued operation as it’s gone, so you’re asking how to present 2015? X –  a subsidiary of the group A, Note: you can scroll the table horizontally if it doesn’t fit your screen. instructions how to enable JavaScript in your web browser When a change in depreciation method occurs: a. prior years' financial statements should be changed to reflect the newly adopted method. Additionally, net cash flows attributable to the operating, investing and financing activities of discontinued operations should also be disclosed (IFRS 5.33(c)). 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. Start studying Accounting 303 Final Ch.4. Here are the 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. ... Events or circumstances may extend the period to complete the sale beyond one year… Discontinued operation 203 47. Functional and presentation currency 16 4. Presentation and Disclosure. 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 … Next, we explain the effects of these assumptions in greater detail (we learned the prior period adjustment earlier but will review its presentation here). c. When operations are discontinued, prior periods are restated for the sake of comparability and taxes must be allocated to both continuing and discontinued operations… 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. 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 associated with discontinued operations on the balance sheet. Some stakeholders felt that too many disposals, including routine disposals of small groups of assets, qualified for discontinued operations presentation under the previous guidance. 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). The total of the post-tax profit or loss of the discontinued operation, and the post-tax gain or loss recognised on the measureme… The following must be disclosed: [IAS 35.27 and IAS 35.31] a description of the discontinuing operation; the business or geographical segment(s) in which it is reported in accordance with IAS 14; the date that the plan for discontinuance was announced; (Last updated: 9/30/2009) Certain events that occur after the end of a fiscal year will require retrospective revision of that year’s financial statements (the “pre-event financial statements”) if they are reissued after financial statements covering the period during which the event occurred have been filed. 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. represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or. Operating segments 18 6. 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). The results of the Alcon business are reported as discontinued operations. Net income, including a loss of €0.3 billion from discontinued operations, was €0.7 billion compared to €1.9 billion in Q2 FY 2019, which benefited from income of €0.2 billion from discontinued operations as well as a lower tax rate; basic earnings per share (EPS) declined to €0.80 For example, under existing GAAP, a discontinued operation may include a reportable segment, operating segment, reporting unit, subsidiary, or an asset group. For example, certain entities. 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. The post-tax profit or loss of discontinued operations is presented as a single amount in the P/L and OCI. 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. Discontinued Operations Under GAAP . 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. Income and expenses 27 9. c) an amount after continuing operations. Income and expenses 27 9. c. the cumulative effect of the change should be reflected on the income statement as of the beginning of the next year. Prior year balances in the statement of financial positions are … 6.2 Presentation of discontinued operations . Approach #1 treats the whole subsidiary X, i.e. b. the change should be reported in current and future years. And now, in 2016, you don’t have any discontinued operation as it’s gone, so you’re asking how to present 2015? 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. 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. 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 The disadvantage is that some intragroup transactions are not eliminated on consolidation as required by IFRS 10. Company C has income from continuing operations of USD 700 million. Earnings per share 30 Employee benefits 32 11. 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. b. the change should be reported in current and future years. Starting in 2015, the rules changed, limiting the scope of … On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA for an aggregate cash consideration of €407.5 million before adjustments in respect of working capital, taxation and costs. January 2016 IFRIC update discusses presentation of intragroup transactions between continuing and discontinued operations. . in the split between continuing (13 000) and discontinued (7 000) operation. This pronouncement established formal reporting requirements for various events, including the effects of a disposal of a business segment. transactions with external parties and intragroup transactions, as a discontinued operation presented in one line. Revenue and expenses of A and X are given in the table below. b) an extraordinary item. All rights reserved. a. A discontinued operation is a separate major business division or geographical operation that the company has disposed of or is holding for sale. 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. Disposal of subsidiary 212 51. During the year it disposed-off one of its segments Segment A for USD 120 million. Learn vocabulary, terms, and more with flashcards, games, and other study tools. 6.2.1 Requirements of FRS 102. Currently, there is diversity in practice regarding the presentation of assets and liabilities. We can see that X provides an input to operations of group A and has only intragroup revenue. But sometimes businesses sell (or retire) a product line, asset group or another component. Commitments 222 55. COVID 19 – Temporary office facilities closure. 1 The KPMG Guide: FRS 2, Share-based Payment and FRS 5, Non-current Assets Held for Sale and Discontinued Operations 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 advantage of this approach is that it faithfully presents results of both operations. In producing this revenue, it incurs expenses with external parties. reclassify these assets and liabilities on the prior-year balance sheet to conform prior-year balance. Let’s discuss two approaches to presentation of consolidated P/L with subsidiary X presented as a discontinued operation. 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. 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.”. 0:37: Discontinued operations—overview. 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. When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as: a) a prior period adjustment. See page 45 and Notes 2, 3 and 11 for a full explanation. 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. 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