This free, guided checker walks your finance team through the key decision points for ASC 205-20 Discontinued Operations. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level US GAAP screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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The component test is the gate to ASC 205-20. Look to how management runs and reports the operation: discrete revenue and expense capture, separable cash flows, and identifiable assets and liabilities support component status. A sale of scattered assets that never functioned as a distinguishable operation fails here regardless of size.
Not a component of an entity - discontinued operations presentation is not available (ASC 205-20-20).
Official guidance: FASB Accounting Standards Codification
ASC 205-20-45-1D provides a separate path for a business or nonprofit activity that, on acquisition, meets the held-for-sale criteria of ASC 205-20-45-1E. No strategic shift analysis is required because the entity never intended to hold the operation. Document the acquisition-date held-for-sale evidence carefully; classification after the acquisition date does not qualify under this paragraph.
Use the interactive tool above to see how this applies to your situation.
Official guidance: FASB Accounting Standards Codification
ASC 205-20-45-1B recognizes three triggering events: the component meets the held-for-sale criteria, is disposed of by sale, or is disposed of other than by sale. Timing matters - abandonments and spinoffs are reported as discontinued operations only in the period of actual abandonment or distribution, and a plan alone does not trigger reporting until every held-for-sale criterion is satisfied.
No triggering disposal event has occurred - continue held-and-used presentation and monitor the plan (ASC 205-20-45-1B).
Official guidance: FASB Accounting Standards Codification
All six criteria in ASC 205-20-45-1E (mirroring ASC 360-10-45-9) must be met simultaneously; the classification date is the first reporting date on which they are all satisfied. Common traps include boards that have approved exploring a sale but not committed to one, carve-out entanglements that prevent immediate-sale availability, and asking prices set above fair value to test the market.
Held-for-sale criteria are not met - no discontinued operations reporting yet (ASC 205-20-45-1E).
Official guidance: FASB Accounting Standards Codification
ASC 205-20-45-1C illustrates a strategic shift with disposals of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity. The examples are illustrative, not exhaustive - the substance of the question is whether the exit changes the way the entity operates rather than merely trimming the existing portfolio.
No strategic shift - report within continuing operations, with ASC 360-10-50-3A disclosure if individually significant.
Official guidance: FASB Accounting Standards Codification
ASC 205-20 does not define a quantitative bright line for 'major.' In practice, entities benchmark the component's revenue, pretax income or loss, assets, and cash flows against consolidated totals over several periods, then weigh qualitative factors such as strategic importance and market presence. Document the metrics and thresholds used - this is the judgement an auditor or regulator will probe first.
Strategic in nature but not major in effect - continuing operations presentation applies (ASC 205-20-45-1B).
Official guidance: FASB Accounting Standards Codification
Continuing involvement does not disqualify discontinued operations presentation under the current model; it adds disclosure. ASC 205-20-50-4A and 50-4B require a description of the involvement, the period it is expected to continue, related cash inflows and outflows, and revenues or expenses presented in continuing operations that arise from the involvement. Transition services agreements are a frequent source of this disclosure.
Discontinued operation with significant continuing involvement - added disclosures under ASC 205-20-50-4A through 50-4B. Discontinued operation - separate presentation and the ASC 205-20-50 disclosure package apply.
Official guidance: FASB Accounting Standards Codification
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