In September 2008, the IASB issued an Exposure Draft Discontinued Operations – Proposed Amendments to IFRS 5 (the 2008 ED). These proposed amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations were part of the larger joint project between the IASB and the FASB on the presentation of financial statements. The FASB at that time also issued a proposed FASB Staff Position FAS 144-d Amending the Criteria for Reporting a Discontinued Operation. The proposals in the 2008 ED introduced a revised “converged” definition of discontinued operations, which was based on the definition of an operating segment as defined by IFRS 8 Operating Segments, and included additional disclosure requirements in respect of all components of an entity that either have been disposed of or were classified as held for sale.
EFRAG issued a comment letter to the IASB on the proposals in the 2008 ED on 30 January 2009. In its comment letter, EFRAG did not agree with the proposal that the definition a discontinued operation should focus on “operating segments”. In EFRAG’s view, the definition should focus on the notion of a “major discontinuance”, and that would not be always achieved by focusing on operating segments. EFRAG also did not support the proposals to require disclosures about all components of the reporting entity that have been either disposed of or are classified as held for sale regardless of whether they meet the definition of discontinued operations. In EFRAG’s view, the scope of the disclosures should be limited to items, which are presented separately as discontinued operations in the income statement.
After deliberations on respondents’ concerns about the revised definition of a discontinued operation, the IASB and the FASB (the Boards) agreed to retain the existing definition of a discontinued operation in IFRS 5 (i.e., the FASB will adopt the IFRS 5 definition), but agreed to require additional disclosure for all discontinued operations regarding “continuing involvement”, if applicable. In addition, the Boards agreed to revise the proposals to require disclosures about all components of an entity that either have been disposed of or are classified as held for sale and to limit them only to individually material components.
The revised proposals are expected to be re-exposed. Click here for more information.