FAS 144-Measuring Assets Held for Sale
FAS 144Measuring Assets Held for Sale
Last Updated: May 23, 2008 (Updated sections are indicated with an asterisk *)
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
The objective of this project is to consider whether assets held for sale should be measured at fair value instead of fair value less cost to sell, as currently required. The Board will consider the applicable requirements in FASB Statements No. 141(R), Business Combinations, and No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
*Decisions Reached at the Last Meeting (May 14, 2008)
The FASB chairman announced that the Board’s project to consider whether assets held for sale should be measured at fair value instead of fair value less cost to sell, as currently required under FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, was removed from the agenda. That decision was based on the results of staff analysis and the IASB’s decision to remove a similar project from its agenda.
Statement 141(R) requires entities to measure assets acquired in a business combination at their fair values at the acquisition date, with some limited exceptions. One temporary exception applies to long-lived assets qualifying as held for sale at the acquiring date: Statement 141(R) allows those assets to be measured at fair value less cost to sell at the acquisition date. This exception is consistent with Statement 144, which requires entities to measure long-lived assets at fair value less cost to sell for subsequent accounting. The Board provided this exception so that acquirers would not have to recognize a loss after a business combination for assets that were initially measured at fair value and subsequently remeasured at fair value less cost to sell pursuant to Statement 144. Such a loss would not faithfully represent the activities of the acquirer, since it would stem entirely from different measurement requirements for assets held for sale acquired in a business combination than for assets already held that are classified as held for sale.
During its deliberations on Statement 141(R), the Board considered eliminating the exception to the measurement principle for assets held for sale and requiring those assets to be initially measured at fair value. However, the Board wanted to avoid requiring entities to recognize the loss described above. Therefore, it decided to amend Statement 144 to require assets classified as held for sale to be measured at fair value, rather than at fair value less cost to sell. Under the FASB’s due process procedures, the Board is required to make these amendments in separate projects to give constituents the opportunity to comment on the proposed changes.