Approach #1 treats the whole subsidiary X, i.e. IFRScommunity.com is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Operating segments 18 6. During the year it disposed-off one of its segments Segment A for USD 120 million. 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). 58. 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. Its book value was USD 100 million. b. the change should be reported in current and future years. c. the cumulative effect of the change should be reflected on the income statement as of the beginning of the next year. 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. associated with discontinued operations on the balance sheet. But sometimes businesses sell (or retire) a product line, asset group or another component. This pronouncement established formal reporting requirements for various events, including the effects of a disposal of a business segment. The post-tax profit or loss of discontinued operations is presented as a single amount in the P/L and OCI. Earnings per share 30 Employee benefits 32 11. 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. Currently, there is diversity in practice regarding the presentation of assets and liabilities. 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. For example, certain entities. © 2020 Kevane Grant Thornton. First, the … [IAS 35.29] What to disclose. That is, we believe that current and noncurrent classification of the assets and liabilities in the prior comparative periods should not change. 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. 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. Add the income or loss from operations and the income tax benefit or expense together to calculate income from discontinued operations, net of taxes. X –  a subsidiary of the group A, Note: you can scroll the table horizontally if it doesn’t fit your screen. 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 … There is a group A containing a subsidiary X, which at some point is classified as a discontinued operation under IFRS 5. Use of judgements and estimates 16 Performance for the year 18 5. Discontinued operation 203 47. Net finance costs 29 10. We can see that X provides an input to operations of group A and has only intragroup revenue. In our example, it seems as if X is a loss making subsidiary, which obviously is not true. In 2016, inventory for discontinued operation will be 0. Example. In certain situations, such a disposal should be reported as a discontinued operation under U.S. Generally Accepted Accounting Principles (GAAP). Learn vocabulary, terms, and more with flashcards, games, and other study tools. Alternatively, You can contact us via kgt@pr.gt.com. Additionally, net cash flows attributable to the operating, investing and financing activities of discontinued operations should also be disclosed (IFRS 5.33(c)). 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 … 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… 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. ... Events or circumstances may extend the period to complete the sale beyond one year… COVID 19 – Temporary office facilities closure. 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. Examples of long-lived assets include: property, plant and equipment. 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. c. Plant, and Equipment, and the guidance related to discontinued operations is included in ASC 205-20, Presentation of Financial Statements – Discontinued Operations. Net finance costs 29 10. The results of the Alcon business are reported as discontinued operations. Functional and presentation currency 16 4. Entities may want to provide additional information in the notes that would highlight the impact of intragroup transactions between continuing and discontinued operations. Next, we explain the effects of these assumptions in greater detail (we learned the prior period adjustment earlier but will review its presentation here). 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. Income and expenses 27 9. In particular, the IFRS requires assets that meet the … Discontinued Operations Under GAAP . Revenue and expenses of A and X are given in the table below. 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). ... so the disclosures relating to discontinued operations in the prior period relate to all discontinued operations up to the current period. in loss from discontinued operations, were $656 thousand, and $2.588 million in 2017 and 2016, respectively. Some stakeholders felt that too many disposals, including routine disposals of small groups of assets, qualified for discontinued operations presentation under the previous guidance. When a change in depreciation method occurs: a. prior years' financial statements should be changed to reflect the newly adopted method. When a change in depreciation method occurs a. prior years' financial statements should be changed to reflect the newly adopted method. Discontinued operations are presented both under US GAAP and IFRS. Its primary effect is to tighten the requirements for treating the disposal of a component of a business as a discontinued operation. 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 Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). 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. For example, certain entities reclassify these assets and liabilities on the prior-year balance sheet to conform prior-year balance sheet presentation to the presentation required on the current-year balance sheet. Discontinued operations include income from operations of the discontinued segment plus a gain or loss on disposal. To find out more about cookies, what they are and how we use them, please see our privacy notice, which also provides information on how to delete cookies from your hard drive. Use of judgements and estimates 16 Performance for the year 18 5. 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. additional catch-up depreciation) are included in current year P/L of continuing operations (IFRS 5.28). A prior period adjustment was made this year. Non-cash transactions 221 53. The entity didn’t have any significant continuing involvement in the operations of the component after the disposal transaction. 6.2.1 Requirements of FRS 102. Limiting discontinued operations presentation to disposals of components representing a strategic shift could significantly decrease the number of disposals qualifying for discontinued operations presentation. See page 45 and Notes 2, 3 and 11 for a full explanation. 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… In producing this revenue, it incurs expenses with external parties. 1Headline: In addition to statutory reporting, the Group reports on a headline basis except for balance sheet and cash-flow. Group’s reported financial data for the current and prior years into “continuing” “discontinued” and operations. The total amoun… A discontinued operation is a separate major business division or geographical operation that the company has disposed of or is holding for sale. instructions how to enable JavaScript in your web browser When operations are discontinued, prior periods are restated for the sake of comparability and taxes must be allocated to both continuing 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. Revenue 26 8. Start studying Accounting 303 Final Ch.4. 6.2 Presentation of discontinued operations . Prior to 2002, the rules for discontinued operations were described in Accounting Principles Bulletin (APB) 30. The advantage of this approach is that it faithfully presents results of both operations. 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)). The column ‘A+X’ shows consolidated results of the group A without X being treated as a discontinued operation. When a change in depreciation method occurs: a. prior years' financial statements should be changed to reflect the newly adopted method. If that’s the case, then you should present 2015 exactly as the last year, i.e. presentation and disclosure of discontinued operations. On January 31, 2012, Rocket's fiscal year-end, the following information relative to the discontinued division was accumulated: D. 125000 On November 1, 2011, Jamison Inc adopted a plan to discontinue its barge division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. 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). b. Disposal of subsidiary 212 51. Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement. 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 The post-tax profit or loss of discontinued operations is presented as a single amount in the P/L and OCI. Revenue 26 8. FRS 5 will replace FRS 135 2004, Discontinuing Operations, when it becomes effective. in the split between continuing (13 000) and discontinued (7 000) operation. 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. We use data from the year before to ensure that we capture a full year of pre-tax income for the discontinued operation. We start with an overview of the purpose of discontinued operations presentation and why it’s meaningful to users of the financial statements. Question: Execucomp Corporation S Financial Statements In The Current Year Show A Loss From Discontinued Operations, A Prior Period Adjustment, And An Extraordinary Gain. Disclose the results from discontinued operations on the income statement or in accompanying notes. Home, instructions how to enable JavaScript in your web browser, Presentation of discontinued operations in a classified balance sheet, whether a reporting entity should present those assets and liabilities as current and noncurrent in a classified balance sheet, how to determine which assets and liabilities should be classified as current, whether there should be changes to the prior comparative-period classifications of assets and liabilities now that the held-for-sale criteria are met for a discontinued operation. 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. But sometimes businesses sell (or retire) a product line, asset group or another component. in the split between continuing (13 000) and discontinued (7 000) operation. 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 effect, the line presenting discontinued operations includes intragroup revenue earned by X. Consequently, continuing operations of group A include intragroup expenses incurred with X. b. the change should be reported in current and future years. (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. 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 … 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; Financial reporting generally focuses on the results of continuing operations. If that’s the case, then you should present 2015 exactly as the last year, i.e. For official information concerning IFRS Standards, visit IFRS.org. 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