IP No. 24 Issue Paper
IP 24–6
improvements. The disposal of two or more unrelated assets that individually do not constitute a
segment of a business should not be combined and accounted for as a disposal of a segment of
business.
14. Definition of Measurement and Disposal Dates. For purposes of applying the
provisions of this Opinion, the measurement date of a disposal is the date on which the
management having authority to approve the action commits itself to a formal plan to dispose of a
segment of the business, whether by sale or abandonment. The plan of disposal should include,
as a minimum, identification of the major assets to be disposed of, the expected method of
disposal, the period expected to be required for completion of the disposal, an active program to
find a buyer if disposal is to be by sale, the estimated results of operations of the segment from
the measurement date to the disposal date, and the estimated proceeds or salvage to be realized
by disposal. For purposes of applying this Opinion, the disposal date is the date of closing the
sale if the disposal is by sale or the date that operations cease if the disposal is by abandonment.
15. Determination of Gain or Loss on Disposal of a Segment of a Business. If a loss is
expected from the proposed sale or abandonment of a segment, the estimated loss should be
provided for at the measurement date.
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If a gain is expected, it should be recognized when
realized, which ordinarily is the disposal date. The determination of whether a gain or a loss
results from the disposal of a segment of a business should be made at the measurement date
based on estimates at that date of the net realizable value of the segment after giving
consideration to any estimated costs and expenses directly associated with the disposal and, if a
plan of disposal is to be carried out over a period of time and contemplates continuing operations
during that period, to any estimated income or losses from operations. If it is expected that net
losses from operations will be incurred between the measurement date and the expected
disposal date, the computation of the gain or loss on disposal should also include an estimate of
such amounts. If it is expected that income will be generated from operations during that period
the computation of the gain or loss should include the estimated income, limited however to the
amount of any loss otherwise recognizable from the disposal; any remainder should be
accounted for as income when realized. The Board believes that the estimated amounts of
income or loss from operations of a segment between measurement date and disposal date
included in the determination of loss on disposal should be limited to those amounts that can be
projected with reasonable accuracy. In the usual circumstance, it would be expected that the plan
of disposal would be carried out within a period of one year from the measurement date and that
such projections of operating income or loss would not cover a period exceeding approximately
one year.
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If financial statements for a date prior to the measurement date have not been issued, and the expected loss
provides evidence of conditions that existed at the date of such statements and affects estimates inherent in the
process of preparing them, the financial statements should be adjusted for any change in estimates resulting
from the use of such evidence. (See Statement on Auditing Standards No. 1, Codification of Auditing Standards
and Procedures, paragraph 560.03.)
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When disposal is estimated to be completed within one year and subsequently is revised to a longer period of
time, any revision of the net realizable value of the segment should be treated as a change in estimate (see
paragraph 25).
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16. Gain or loss from the disposal of a segment of a business should not include
adjustments, costs, and expenses associated with normal business activities that should have
been recognized on a going-concern basis up to the measurement date, such as adjustments of
accruals on long-term contracts or write-down or write-off of receivables, inventories, property,
plant, and equipment used in the business, equipment leased to others, deferred research and
development costs, or other intangible assets. However, such adjustments, costs, and expenses
which (a) are clearly a direct result of the decision to dispose of the segment and (b) are clearly
not the adjustments of carrying amounts or costs, or expenses that should have been recognized
on a going-concern basis prior to the measurement date should be included in determining the
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