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Perspectives

Impairments and disposals 

On the Radar: Accounting and reporting for long-lived assets and discontinued operations

Under ASC 360-10, the accounting and reporting for long-lived assets differ depending on what the entity intends to do with them. This edition of On the Radar maps out the decision process and highlights key considerations for impairments and disposals of long-lived assets and discontinued operations.

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Clarifying intent

Long-lived assets within the scope of ASC 360-10 are accounted for and tested for impairment differently depending on the entity’s intent regarding the assets. Long-lived assets that the entity intends to hold and use in its operations, including long-lived assets that the entity intends to abandon, distribute to owners, or exchange in a nonmonetary transaction accounted for at carrying amount, are tested for impairment when a triggering event occurs by performing a two-step recoverability test. By contrast, long-lived assets that the entity intends to sell are tested for impairment upon classification as held for sale and in each subsequent reporting period by comparing their carrying amount with their fair value less costs to sell.

On the Radar: Impairments and Disposals of Long-Lived Assets and Discontinued Operations

Long-lived assets classifications

Considerations for SEC registrants

For disposals reported as discontinued operations, SEC registrants must consider the impact of the retrospective change on the historical financial statements included in their Exchange Act reports (e.g., Forms 10-K and 10-Q) and in registration statements under the Securities Act (e.g., registration statements on Form S-3) and other nonpublic offerings. Registrants may also be required to report a disposition, including certain disposals that do not qualify as discontinued operations, on a Form 8-K and provide pro forma financial information that gives effect to the disposition. Further, registrants must consider the impact the revised financial statements may have on other SEC requirements (e.g., SEC Regulation S-X, Rules 3-05, 3-09, 4-08(g), and 3-10).

Continue your learning on impairments and disposals of long-lived assets and discontinued operations

Deloitte’s Roadmap Impairments and Disposals of Long-Lived Assets and Discontinued Operations provides Deloitte’s insights into the guidance in ASC 360-10 and ASC 205-20 on impairments and disposals of long-lived assets and presentation of discontinued operations.

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