FASB Update

ASU Discontinued Operations Big change is what constitutes a discontinued operation, either of following A component of an entity that Has been disposed of, meets the criteria to be classified as held-for-sale, or has been abandoned/spun-off; and Represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, or Is a business or nonprofit activity that, on acquisition, meets the criteria to be classified as held-for-sale Continuing involvement with discontinued operation no longer relevant

Strategic Shift? Examples are disposals of a major geographic area, major line of business, or major equity method investment Illustrations provided in ASU but no definitive bright-line tests, judgment required Allowing equity method investments is new Oil & gas properties accounted for under full- cost method still precluded

Impact? Substantial reduction in number of discontinued operations reported in financials New definition very similar to APB 30 definition

Reporting Requirements Income statement remains the same Balance sheet requires separate reporting of discontinued operations’ assets and liabilities for current year and any prior years shown for comparative purposes Expanded disclosures about discontinued operations’ major assets and liabilities, major line items for its results of operations, & its cash flows

Effective Date Public business entities & not-for-profit entities – prospectively for disposals (or classifications as held- for-sale) that occur within annual periods beginning on or after December 15, 2014 and interim periods within those annual periods Other entities – same for annual periods but interim reporting not required until interim periods within annual periods beginning on or after December 15, 2015 Early application permitted unless discontinued operation has been reported separately in previously issued financials or financials available for issuance

ASU Going Concern Going concern is presumed as basis of financial reporting unless liquidation becomes imminent If liquidation is not imminent, there may be conditions/events that raise substantial doubt about entity’s ability to continue as going concern Prior to ASU there was no guidance related to management’s responsibility to assess and respond to these conditions/events

Main Provisions Management, at each financial statement date, should assess whether there are conditions/events that raise substantial doubt about entity’s ability to continue as going concern Timeframe for continuing is one year from date financial statements are issued Substantial doubt exists if it is probable entity will not be able to meet its obligations within this timeframe

If substantial doubt exists management must determine whether its plans to mitigate conditions/events will alleviate substantial doubt This determination focuses both on probability of plans being implemented and probability of success if implemented