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National Professional Services Group  |  CFOdirect Network National Professional Services Group  |  CFOdirect Network

National Professional Services Group | CFOdirect Network - PDF document

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National Professional Services Group | CFOdirect Network - PPT Presentation

x2013 wwwcfodirectpwccom In brief 1 FASB issues final standard redefining discontinued operations What happened On April 10 2014 the FASB issued Accounting Standards Update ASU No 20 ID: 256055

– www.cfodirect.pwc.com In brief 1 FASB issues final standard

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National Professional Services Group | CFOdirect Network – www.cfodirect.pwc.com In brief 1 FASB issues final standard redefining discontinued operations What happened ? On April 10 , 2014 , the FASB issued Accounting Standards Update (ASU) No. 2014 - 08 Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity , which c hange s the criteria for determining which disposals can be present ed as discontinued operations and modifies related disclosure requirements . New d efinition of a discontinued operation Under the new guidance, a discontinued operation is defined as a component or group of components that is disposed of or i s classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The standard states that a strategic shift could include a disposal of (i) a major geographical area of operations , (ii) a major line of business , (iii) a major equity method investment , or ( iv ) o ther major part s of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. A business or nonprofit activity that upon acquisition qualifies as held for sale will a lso be a discontinued operation. The standard no longer preclude s presentation a there are operations and cash flows of the component t hat have not been eliminated from the reporting entity’s ongoing operations , or (ii) there is significant continuing involvement with a component after its disposal. Disclosures The standard introduces several new disclosures, some of which are described below. An entity is required to present i n the statement of cash flows or in a note either (i) total operating and investing cash flows for discontinued operations , or (ii) depreciation , amortization, capital expenditures, and significant operating and investing noncash items related to discontinued operation s . A dditional disclosures are required when an entity retains significant continuing involvement with a discontinued operation after its disposal, including the amount of cash flows t o and For disposals of individually significant components that do not qualify as discontinued operations, an entity must disclose pre - tax earnings of the disposed component . No. 2014 - 05 April 1 1 , 201 4 At a glance FASB's new standard changes what you thought you knew about discontinued operations . Questions? PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams who ha ve questions should contact the Business Combinations team in the National Professional Services Group (1 - 973 - 236 - 7801 ). Authored by: Kevin Catalano Partner Phone: 1 - 973 - 236 - 5057 Email: kevin.catalano@us.pwc.com Matthew L. Brenner Senior Manager Phone: 1 - 973 - 236 - 7043 Email: matthew.l.brenner@us.pwc.com © 201 4 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States me mber firm , and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. To access additional content on financial report ing issues, visit www.cfodirect.pwc.com , PwC’s online resource for financial executives. Balance sheet presentation A n entit y must reclas sify the assets and liabilities of a discontinued operation that are classified as held for sale or disposed of in the current period for the comparative periods presented in the statement of financial position. Wh y is this important ? The guidance applies to all entities that dispose of components and , in some cases , is expected to result in fewer disposals being presented as discontinued operations. It will significant ly change current practice for assessing discontinued operations and affect an entity’s income and earnings per share from continuing operations. Evaluating whether a disposal represents a strategic shift will require significant judgment. Complexity should be reduced, h owever, by the e liminati o n of the current requireme nt s to assess whether a component’s operations and cash flows have been eliminated from the ongoing entity and the significance of continuing involvement with a disposed component . What's next ? The guidance applie s prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. The standard is required to be adopted by public business entities ( and not - for - profit entities that issue securities or are conduit bond obligors ) in an nual periods beginning on or after December 15, 2014, and interim periods within those annual periods . It is effective for all other entities in annual periods beginning on or after December 15, 201 4 , and interim periods beginning on or after December 15, 2015 . However, a ll entities may early adopt the guidance for new disposals (or new classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. This means , for example, that calendar y ear - end entities can app ly the amended definition to new disposals beginning in the first quarter of 2014, provided the ir interim financial statements have not been issued or made av ailable for issuance before the release of this standard . We plan to issue a Dataline publication in the near term that will include more det ails, observations , and implementation guidance about the new standard .