New FASB discontinued operations proposal aims for relevance

Investors told FASB that current GAAP calls too often for disposals of assets to be presented as discontinued operations.

FASB has responded to those concerns by issuing a proposal that would redefine “discontinued operation” in such a way that discontinued operations disclosures would be required only for disposals that are considered significant changes in strategy.

Comments are requested by Aug. 30 on the Proposed Accounting Standards Update, Presentation of Financial Statements (Topic 205)—Reporting Discontinued Operations.

FASB Chairman Leslie Seidman said in a news release that investors are concerned that the requirements under current standards result in financial statements that are less relevant and more costly to prepare.

“The board is seeking stakeholder input on changes intended to capture only those disposals that represent major strategic shifts as discontinued operations and to provide enhanced disclosures about the financial effects of discontinued operations and other disposals of significant components of an organization,” Seidman said.

Discontinued operations and other disposals that do not qualify for discontinued operations presentation in the financial statements would still be subject to additional disclosures under the proposal.

In addition, disclosures about an organization’s continuing involvement with a discontinued operation would be expanded. Continuing involvement disclosures would be required until the discontinued operation’s results no longer are separately presented in the statement where net income is reported.

If approved, according to FASB, the proposal would achieve greater convergence with IFRS No. 5, Non-current Assets Held for Sale and Discontinued Operations.

Comments can be made on FASB’s website.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.