IASB proposes revised definition of discontinued operations

The International Accounting Standards Board has published for public comment an exposure draft of proposed amendments to IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

The proposals are to revise the definition of discontinued operations and require additional disclosure about components of an entity that have been disposed of or are classified as held for sale. The proposals are the result of a joint project by the IASB and the US Financial Accounting Standards Board to develop a common definition of discontinued operations and require common disclosures about them. The FASB is publishing parallel proposals to amend its standards.

Broadly speaking, discontinued operations are operations that an entity has disposed of or holds for sale. Entities present discontinued operations separately from continuing operations because of the ongoing cash flows that continuing operations will generate. By adopting a definition for discontinued operations that reflects the definition of operating segments in IFRS 8, Operating Segments, the proposals would also increase consistency between IFRSs and strengthen the basic principle in IFRS 5.

The proposed definition could result in fewer items being recognized in financial statements as discontinued operations than at present. However, the additional disclosures would give information about components of an entity that have been disposed of or are held for sale but do not meet the definition of a discontinued operation.

The exposure draft is open for public comment until 23 January 2009. It can be viewed at www.iasb.org.