discontinued operations

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 505-60 governs the pro rata distribution of nonmonetary assets that constitute a business to an entity's owners (a spinoff). Such distributions are recorded at the carrying (recorded) amount of the distributed business, reduced for any indicated impairment, and are never accounted for as a sale of the spinnee followed by a distribution of proceeds — even if the spun-off operations are sold immediately afterward. When the substance of the transaction differs from its legal form, the legal spinnee is treated as the accounting spinnor (reverse spinoff accounting).

ASC 740-20 governs intraperiod tax allocation: after total income tax expense or benefit for the period is computed under ASC 740-10, this Subtopic allocates that total among continuing operations, discontinued operations, other comprehensive income, and items charged or credited directly to shareholders' equity (740-20-45-2). Continuing operations is computed first ("with-and-without"), considering only items in continuing operations (740-20-45-7), and the residual is assigned to the single other item, or apportioned among multiple other items in proportion to their individual effects (740-20-45-12 and 45-14).

This subtopic gives industry-specific guidance on financial instruments for not-for-profit, business-oriented health care entities. Its single substantive rule is a presentation rule: when such an entity elects the fair value option, the resulting unrealized gains and losses must be reported inside the performance indicator (or within discontinued operations, as appropriate) rather than outside it.