With a new standard in place governing how to account for discontinued operations, companies attempting to apply the guidance for the first time are finding they have a think a little harder to arrive at the right accounting.
The Financial Accounting Standards Board adopted a new approach for how to define and reflect a discontinued operation in financial statements that took effect in 2015 for calendar-year companies. The standard says a discontinued operation is one that constitutes a major strategic shift and has a major impact on the entity, although the standard doesn’t provide guidance on how to define those terms, says Beth Paul, a partner with PwC. “Now in the first and second quarter, as companies start to dispose of things and apply the standard, they’re pausing to determine if its meets that criteria,” she says. “They’re realizing that bar is significant.”
