# ASC 205-20-S99: Presentation of Financial Statements — Discontinued Operations — SEC 99 SEC Materials Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/205/20/#sec-99-sec-materials) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T22:53:32.088Z to 2026-09-09T22:53:32.088Z Record version: sha256:2e012fa7ef563a22e8341e8c6acbd3ead9a9ca028da43c0081b141357bf8602b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 205-20-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/205/20/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [205-20-S99-1](https://asc.understandingaccounting.org/asc/205/20/#205-20-S99-1) Pending content: no Source downloaded (UTC): 2026-09-09T22:53:32.088Z to 2026-09-09T22:53:32.088Z Record version: sha256:d0be3ea25a40e70d106a1194ed762a00a9ea32a0b36b09c2aec4e2c3925200fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.Z.4, Disposal of Operation with Significant Interest Retained. - Facts: A Company disposes of its controlling interest in a component of an entity as defined by FASB ASC Master Glossary. The Company retains a minority voting interest directly in the component or it holds a minority voting interest in the buyer of the component. Controlling interest includes those controlling interests established through other means, such as variable interests. Because the Company's voting interest enables it to exert significant influence over the operating and financial policies of the investee, the Company is required by FASB ASC Subtopic 323-10, Investments—Equity Method and Joint Ventures—Overall, to account for its residual investment using the equity method. FN54 - FN54 In some circumstances, the seller's continuing interest may be so great that divestiture accounting is inappropriate. - Question: May the historical operating results of the component and the gain or loss on the sale of the majority interest in the component be classified in the Company's statement of operations as "discontinued operations" pursuant to FASB ASC Subtopic 205-20, Presentation of Financial Statements—Discontinued Operations? - Interpretive Response: No. A condition necessary for discontinued operations reporting, as indicated in FASB ASC paragraph [205-20-45-1](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-1) is that an entity "not have any significant continuing involvement in the operations of the component after the disposal transaction." In these circumstances, the transaction should be accounted for as the disposal of a group of assets that is not a component of an entity and classified within continuing operations pursuant to FASB ASC paragraph [360-10-45-5](https://asc.understandingaccounting.org/asc/360/10/#360-10-45-5) (Property, Plant, and Equipment Topic). FN55 - FN55 However, a plan of disposal that contemplates the transfer of assets to a limited-life entity created for the single purpose of liquidating the assets of a component of an entity would not necessitate classification within continuing operations solely because the registrant retains control or significant influence over the liquidating entity. ##### [205-20-S99-2](https://asc.understandingaccounting.org/asc/205/20/#205-20-S99-2) Pending content: no Source downloaded (UTC): 2026-09-09T22:53:32.088Z to 2026-09-09T22:53:32.088Z Record version: sha256:bfe89dc0fba6e29967c6a91f8db93deadcb8c9bd5b0b8d7c73894d9ba9e4c504 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.Z.5, Classification and Disclosure of Contingencies Relating to Discontinued Operations. - Facts: A company disposed of a component of an entity in a previous accounting period. The Company received debt and/or equity securities of the buyer of the component or of the disposed component as consideration in the sale, but this financial interest is not sufficient to enable the Company to apply the equity method with respect to its investment in the buyer. The Company made certain warranties to the buyer with respect to the discontinued business, or remains liable under environmental or other laws with respect to certain facilities or operations transferred to the buyer. The disposition satisfied the criteria of FASB ASC Subtopic 205-20 for presentation as "discontinued operations." The Company estimated the fair value of the securities received in the transaction for purposes of calculating the gain or loss on disposal that was recognized in its financial statements. The results of discontinued operations prior to the date of disposal or classification as held for sale included provisions for the Company's existing obligations under environmental laws, product warranties, or other contingencies. The calculation of gain or loss on disposal included estimates of the Company's obligations arising as a direct result of its decision to dispose of the component, under its warranties to the buyer, and under environmental or other laws. In a period subsequent to the disposal date, the Company records a charge to income with respect to the securities because their fair value declined materially and the Company determined that the decline was other than temporary. The Company also records adjustments of its previously estimated liabilities arising under the warranties and under environmental or other laws. - Question 1: Should the writedown of the carrying value of the securities and the adjustments of the contingent liabilities be classified in the current period's statement of operations within continuing operations or as an element of discontinued operations? - Interpretive Response: Adjustments of estimates of contingent liabilities or contingent assets that remain after disposal of a component of an entity or that arose pursuant to the terms of the disposal generally should be classified within discontinued operations. FN56 However, the staff believes that changes in the carrying value of assets received as consideration in the disposal or of residual interests in the business should be classified within continuing operations. - FN56 Registrants are reminded that FASB ASC Topic 460, Guarantees requires recognition and disclosure of certain guarantees which may impose accounting and disclosure requirements in addition to those discussed in this SAB Topic. - FASB ASC paragraph [205-20-45-4](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-4) requires that "adjustments to amounts previously reported in discontinued operations that are directly related to the disposal of a component of an entity in a prior period shall be classified separately in the current period in discontinued operations." The staff believes that the provisions of FASB ASC paragraph [205-20-45-4](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-4) apply only to adjustments that are necessary to reflect new information about events that have occurred that becomes available prior to disposal of the component of the entity, to reflect the actual timing and terms of the disposal when it is consummated, and to reflect the resolution of contingencies associated with that component, such as warranties and environmental liabilities retained by the seller. - Developments subsequent to the disposal date that are not directly related to the disposal of the component or the operations of the component prior to disposal are not "directly related to the disposal" as contemplated by FASB ASC paragraph [205-20-45-4](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-4). Subsequent changes in the carrying value of assets received upon disposition of a component do not affect the determination of gain or loss at the disposal date, but represent the consequences of management's subsequent decisions to hold or sell those assets. Gains and losses, dividend and interest income, and portfolio management expenses associated with assets received as consideration for discontinued operations should be reported within continuing operations. - Question 2: What disclosures would the staff expect regarding discontinued operations prior to the disposal date and with respect to risks retained subsequent to the disposal date? - Interpretive Response: MD&A FN57 should include disclosure of known trends, events, and uncertainties involving discontinued operations that may materially affect the Company's liquidity, financial condition, and results of operations (including net income) between the date when a component of an entity is classified as discontinued and the date when the risks of those operations will be transferred or otherwise terminated. Disclosure should include discussion of the impact on the Company's liquidity, financial condition, and results of operations of changes in the plan of disposal or changes in circumstances related to the plan. Material contingent liabilities, FN58 such as product or environmental liabilities or litigation, that may remain with the Company notwithstanding disposal of the underlying business should be identified in notes to the financial statements and any reasonably likely range of possible loss should be disclosed pursuant to FASB ASC Topic 450, Contingencies. MD&A should include discussion of the reasonably likely effects of these contingencies on reported results and liquidity. If the Company retains a financial interest in the discontinued component or in the buyer of that component that is material to the Company, MD&A should include discussion of known trends, events, and uncertainties, such as the financial condition and operating results of the issuer of the security, that may be reasonably expected to affect the amounts ultimately realized on the investments. - FN57 Item 303 of Regulation S-K. - FN58 Registrants also should consider the disclosure requirements of FASB ASC Topic 460. ##### [205-20-S99-3](https://asc.understandingaccounting.org/asc/205/20/#205-20-S99-3) Pending content: no Source downloaded (UTC): 2026-09-09T22:53:32.088Z to 2026-09-09T22:53:32.088Z Record version: sha256:4befb490ade05c6c280991fec8d971d7a23ebce48db374ebcec5254e75a177b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Observer Comment: Allocation of Interest to Discontinued Operations. - The SEC staff will expect registrants electing to allocate interest in accordance with paragraph [205-20-45-6](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-6) to clearly disclose the accounting policy (including the method of allocation) and the amount allocated to and included in discontinued operations for all periods presented.