In this case, XYZ will not have any continuing operational involvement in the product lines that it sold. US GAAP, as promulgated by the Financial Accounting Standards Board (FASB), and IFRS, as promulgated by the International Accounting Standards Board (IASB) (collectively, the Boards). 7. 2. Property, Plant and Equipment, Codification Topic 360 Discontinued operations are treated slightly differently under the Generally Accepted Accounting Principles (GAAP). Project … Measured at the lower of (B) and (C) (B) carrying amount (C) fair value less cost to sell 4. 55 Chapter 7: What should I know about mortgage servicing rights? Initial measurement of property, plant and equipment Carrying amount is not recoverable ASC, 2. Discontinued_operations_slides - Discontinued operations Typical coverage of US GAAP Criteria for classification as non-current assets held for sale. Risks and rewards have been transferred from the seller to the buyer. --> a gain is recognized up to "the cumulative loss" previously recognized TRANSFER TO HELD FOR SALE ACCOUNT When a decision is made to sell a loan or portion thereof that was not originated or initially acquired with the intent to sell, the loan should be clearly identified and transferred to the held-for-sale (HFS) account. Test Prep . ASSETS HELD FOR SALE Under UK GAAP there is no held for sale definition. Those Board decisions are tentative and do not change current accounting. The results of operations of (1) and (2) are There are six criteria to achieve held for sale accounting. Additionally, the entity is planning to sell part of its b… Official positions of the FASB are determined only after extensive due process and deliberations. --> a loss is recognized --> if Step 1 shows that carrying amount is not recoverable Accounting for Partial Sales—Under ASC 360 and ASC 970, a sale is considered a partial sale if the seller retains an equity interest in the property (or the buyer). (B) carrying amount Recoverability test 31 Chapter 5: How about some examples? group is classified as held for sale. Long-lived assets "held for sale" Before an asset or disposal group can be classified as held for sale, the following criteria must be met: Asset must be available for immediate sale. Meeting all of these criteria can be difficult and the assessment of each takes a significant amount of judgement. When management decided to put Tayto on the market, it would be a disposal group held for sale. (D) sum of "undiscounted" cash flows from the asset The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration ("the agencies") have jointly issued the attached "Interagency Guidance on Certain Loans Held for Sale." IFRS 5 came into effect on 1 January 2005. --> if (D) < (B) 61 Chapter 8: What about the investors? Adjusted EBITDA, a non-GAAP measure, was $366 million, up 18.4%, and up 14.8% on an OCC basis. zNon-current assets (and disposal groups) held for sale generally are measured at the lower of carrying amount and fair value less costs to sell and are disclosed separately on the face of the balance sheet. An entity has agreed in a directors’ meeting to sell a building, and has tentatively started looking for a buyer for the building. Similarly to IFRS, a company is allowed to report discontinued operations under GAAP when two criteria are met. 1. Any subsequent increase in the disposal group’s fair value, less cost to sell, should be recognized, but not in excess of … RECOGNITION AND MEASUREMENT . Topic 330: Inventory, ASC Codification To proceed, try a search or browse the library, or select one of the following options: Copyright © 2020 Deloitte Development LLC. Newer Post Older Post Home. Presented separately in the statement of financial position Held for sale assets are long -lived assets for which a company has a concrete plan to dispose of the asset by sale. “held for sale”, (HFS) and the “presentation and disclosure for discontinued operations”. In theory, there is a wide range of potential points at which revenue can be recognized. 1. Disposal of long-lived assets Assets held for sale – on top of disclosures, you need to measure them at fair value less cost to sell. --> when there is an indication that carrying amount may not be recoverable Before an asset or disposal group can be classified as held for sale, the following criteria must be met: Asset must be available for immediate sale. “held for sale”, (HFS) and the “presentation and disclosure for discontinued operations”. Both accounting models have similar recognition criteria, requiring that costs be included in the cost of the asset if future economic benefits are probable and can be reliably measured. Criteria to Be Met. 5. --> certain interest costs are also capitalized Codification Topic 360: All rights reserved. UK GAAP (FRS 101): A single line presentation of non-current assets (or liabilities) held for sale will not usually meet company law requirements. Criteria for classifying as held for sale: For a non-current asset (or disposal group) to be classified as held for sale: the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups); and; its sale must be highly probable; a. A long-lived asset or disposal group that meets the held-for- sale criteria should be reported at the lower of its carrying amount or fair value less cost to sell. 3. 1. Those Board decisions are tentative and do not change current accounting. The collection of paymentSales and Collection CycleThe Sales and Collection Cycle, also known as the revenue, receivables, and receipts (RRR) cycle, comprises of various classes of transactions. (A) all costs necessary to make the asset ready for intended use Among other things, those criteria specify that (a) the asset must be available for immediate sale in its present condition subject only to terms that are usual and … Chapter 3: Does my securitization meet the sale criteria under GAAP? An asset is not depreciated while classified as "held for sale" 3. As stated in ‘Objective’, in particular, the IFRS requires : assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and 205-10-05-3A If a component of an entity that either has been disposed of or is classified as held for sale does not meet the conditions to be reported in discontinued operations, Section 360-10-45 on other IFRS 5 requires: IFRS 5 requires: assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and SFAS 144, August 2001 Old UK GAAP and new UK GAAP (FRS 102): Assets held for sale are not covered; the decision to sell an asset is considered an impairment indicator. Overview, ASC Codification meets the criteria to be classified as held for sale or has been abandoned or spun-off and (b) represents a strategic shift that has (or will A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale or for distribution to owners, and that meets any of the following criteria: Project … 21 Chapter 4: How do securitizations fare under IFRS? The item you requested could not be found. The objective of IFRS 5 is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. Establishes criteria beyond that previously specified in Statement 121 to determine when a long-lived asset is held for sale, including a group of assets and liabilities that represents the unit of accounting for a long-lived asset classified as held for sale. 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