27 3 Criteria for reporting discontinued operations


Correcting the prior period financial statements through a Big R restatement is referred to as a “restatement” of prior period financial statements. A critical element of analyzing whether a change should be accounted for as a change in estimate relates to the nature and timing of the information that is driving the change. Companies should carefully assess whether such information is truly “new” information identified in the reporting period or corrects inappropriate assumptions or estimates in prior periods . For example, a change made to the allowance for uncollectible receivables to include data that was accidentally omitted from the original estimate or to correct a mathematical error or formula represents an error correction. Conversely, a change made to the same allowance to incorporate updated economic data (e.g., unemployment figures) and the impact it could have on the customer population would represent a change in estimate.

  • Includes, but is not limited to, method of interest allocation to a discontinued operation.
  • We eliminate from our financial results all significant intercompany transactions, including the intercompany transactions with consolidated VIEs and the intercompany portion of transactions with equity method investees.
  • The Financial Accounting Standards Board is preparing to make targeted improvements to income tax disclosures.
  • S-K Item whether disclosures provided in previous filings need to be modified to explain whether previous conclusions regarding the effectiveness of disclosure and control procedures continue to be appropriate.
  • Disclosure of accounting policy for commitments and contingencies, which may include policies for recognizing and measuring loss and gain contingencies.

The assessment of what qualifies as a strategic shift is based on qualitative and quantitative factors specific to the reporting entity. For example, a reporting entity that only operates in the Northeast region of the US may conclude that each state represents a major geographical area. In contrast, a multinational reporting entity may conclude that each continent represents a major geographical area. “Smith & Howard” is the brand name under which Smith & Howard PC and Smith & Howard Advisory LLC provide professional services. Smith & Howard PC and Smith & Howard Advisory LLC, practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards.

Accounting for the Purchase, Sale and Receipt of Cryptocurrencies

For direct response advertising https://intuit-payroll.org/ that are capitalized, describes those assets and the accounting policy used, including a description of the qualifying activity, the types of costs capitalized and the related amortization period. An entity also may disclose its accounting policy for cooperative advertising arrangements. Additionally, the provisions of the new guidance provided clarification relating to the classification of certain costs incurred relating to revenue arrangements with customers. As a result, we will be classifying certain amounts in cost of goods sold or selling, general and administrative expenses that were previously classified as reductions in net operating revenues.

All retained working capital is short-term and expected to liquidate within a few months after the closing. This must be done for the initial period in which the disposal group is so classified and for all prior periods presented in the statement. The company won’t have any significant continuing involvement in the component’s operations after the disposal transaction. It is important to distinguish the treatment from a change in accounting principle, as defined above, from a change that results from moving from an accounting principle that is not generally accepted to one that is generally accepted.

Other Associated Costs

This reporting requirement could apply if there was a change in controls in the current period that has materially affected, or is reasonably likely to materially affect, the entity’s internal control over financial reporting. Out-of-period adjustment – An error is corrected within the current period as an out-of-period adjustment when it is considered to be clearly immaterial to both the current and prior period. However, there may be circumstances in which the out-of-period adjustment stands out (e.g., it appears as a reconciling item in the rollforward of an account balance) that may warrant consideration of disclosure about the item’s nature. Changes in the reporting entity mainly transpire from significant restructuring activities and transactions.

  • On March 1, 20X1, FSP Corp executes a definitive agreement to sell Component X. Assets to be sold include equipment, customer relationships, and other intangible assets.
  • Discontinued operations must be recorded separately in compliance with the accounting regulatory standards, such as GAAP or IFRS .
  • Nareit initiated a request that the FASB modify FAS 144 to resolve the requirement for the industry to report the disposition of individual or relatively small groups of properties as discontinued operations.
  • Since the successor entity is considered a new reporting entity for accounting purposes, one might conclude that the predecessor financial statements should not be retrospectively adjusted to reflect the successor’s discontinued operations.
  • See FSP 7 for guidance on the calculation and presentation of earnings per share when a reporting entity presents a discontinued operation.
  • An SEC registrant will generally correct the error in such statements by amending its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q (i.e., filing a Form 10-K/A and Form 10-Q/As for the relevant periods).
  • Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

When a Big R reFasb Offers New Guidance For Reporting On Discontinued Operations is appropriate, the previously issued financial statements cannot be relied upon. Therefore, the entity is obligated to notify users of the financial statements that those financial statements and the related auditor’s report can no longer be relied upon. For an SEC registrant, this is accomplished by filing an Item 4.02 Form 8-K (Non-reliance on previously issued financial statements or a related audit report or completed interim review) within 4 business days of the determination by the entity or its auditor that a Big R restatement is necessary.

FASB Proposes Improvements to Reporting Discontinued Operations

Disclosure of accounting policy for the classification of shipping and handling costs, including whether the costs are included in cost of sales or included in other income statement accounts. If shipping and handling fees are significant and are not included in cost of sales, disclosure includes both the amounts of such costs and the line item on the income statement which includes such costs. Our Company expenses production costs of print, radio, television and other advertisements as of the first date the advertisements take place. All other marketing expenditures are expensed in the annual period in which the expenditure is incurred. Advertising costs included in the line item selling, general and administrative expenses in our consolidated statements of income were $4 billion in 2017, 2016 and 2015. As of December 31, 2017 and 2016, advertising and production costs of $95 million and $113 million, respectively, were primarily recorded in the line item prepaid expenses and other assets in our consolidated balance sheets. We use the equity method to account for investments in companies if our investment provides us with the ability to exercise significant influence over operating and financial policies of the investee.

The result will be that the majority of cash flows will continue from the store, despite the change in ownership. Armadillo Industries plans to cancel one of its pressurized container products, due to a lack of sales. Since Armadillo does not track cash flows at the individual product level, there is no need to classify operations related to the single product as a discontinued operation.

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