continuing involvement

ASC 205-20 governs when a disposal must be reported as a discontinued operation and how it is presented and disclosed. A disposal of a component (or group of components) qualifies only if it represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results, triggered when the component is classified as held for sale, disposed of by sale, or disposed of other than by sale (e.g., abandonment or spinoff) (205-20-45-1B). Results of discontinued operations, net of tax, are presented as a separate component of income for current and prior periods, held-for-sale assets and liabilities are presented separately (not offset) on the balance sheet, and extensive note disclosures are required.

ASC 360-20 formerly contained the specialized U.S. GAAP for recognizing profit on sales of real estate (the old FASB Statement No. 66 model with full accrual, installment, cost recovery, deposit, and percentage-of-completion methods, plus sale-leaseback and continuing-involvement rules). Every paragraph in the subtopic has been superseded — mostly by ASU 2014-09 (Revenue from Contracts with Customers) and ASU 2016-02 (Leases). Sales of real estate are now accounted for under ASC 606 if the counterparty is a customer, or under ASC 610-20 for sales of nonfinancial assets to noncustomers, with sale-leaseback transactions governed by ASC 842-40.

ASC 840-40 was the legacy sale-leaseback guidance under the old lease model, addressing when a seller-lessee could recognize a sale of property it simultaneously leased back and how any gain or loss was deferred and amortized. Every substantive paragraph in the subtopic (Sections 05, 15, 25, 30, 35, 50, and 55) has been superseded by ASU 2016-02, so the subtopic now contains no operative guidance. Sale-leaseback transactions are instead accounted for under ASC 842-40, which conditions sale recognition on satisfying the transfer-of-control requirements in ASC 606.

ASC 860-10 is the Overall subtopic for Transfers and Servicing; it sets the scope for the whole topic and, critically, states the derecognition test for transferred financial assets. Under 860-10-40-5, a transfer of an entire financial asset, group of entire financial assets, or a participating interest is a sale if and only if (a) the assets are legally isolated from the transferor even in bankruptcy, (b) each transferee (or beneficial interest holder) can pledge or exchange what it received without a constraint that gives the transferor more than a trivial benefit, and (c) the transferor does not maintain effective control. If any condition fails, the transfer is accounted for as a secured borrowing under 860-30.