What Qualifies for Discontinued Ops Treatment? Statement No. 144 broadens ABP 30 presentation to apply to a component of an entity rather than a segment of a business. a component of an entity comprises operations and cash flows that clearly can be distinguished, operationally and for financial reporting purposes, from the rest of the entity. Examples: a reportable segment (as defined in APB 30), an operating segment (as defined in Statement No. 131), a reporting unit (as defined in Statement No. 142), an asset group (as defined in Statement No. 144).

Criteria for Discontinued Operations Financial Statement Classification Statement No. 144 requires an entity to report in discontinued operations the results of operations of a component of an entity that either has been disposed of or is classified as held for sale if two conditions are met (1) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction (2) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

FAS 144 Criteria for Held for Sale 1. Management commits to a plan to sell. 2. The asset (disposal group) is available for immediate sale in its present condition. 3. The entity initiates an active program to locate a buyer. 4. The entity believes that the sale of the asset (disposal group) is probable, and it expects to record the transfer of the asset (disposal group) as a completed sale within one year 5. The entity actively is marketing the asset (disposal group) for sale at a price that is reasonable in relation to its current fair value. 6. Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Income Statement Requirements for Discontinued Operations the income statement must report in discontinued operations the results of operations of the component, including any gain or loss recognized as a result of measuring at fair value assets held for sale. An entity must report in discontinued operations in the period(s) in which they occur the results of operations of a component of an entity classified as held for sale. This is a significant departure from the previous measurement criteria of discontinued operations. The results of discontinued operations are reported, less applicable income taxes (benefit), as a separate component of income before extraordinary items and the cumulative effect of accounting changes (if applicable). An entity must disclose a gain or loss on disposal either on the face of the income statement or in the notes to the financial statements.

Balance Sheet Measurement Statement No. 144 measures an asset (disposal group) that is classified as held for sale at the lower of its carrying amount or fair value less costs to sell. A long-lived asset that is classified as held for sale is not depreciated during the holding period. Statement No. 144 describes costs to sell as the incremental direct costs to transact a sale, including broker commissions, legal and title transfer fees, and closing costs