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Lesson details
- Estimated study time
- 90 min
Learning objectives (4)
“We are getting rid of the line” can describe continued use until replacement, a plan to sell, abandonment, physical destruction, an ordinary sale, or a disposed component. Those paths share an asset but not one accounting model.
Build a dated routing matrix
For each asset or disposal group, record:
| Date and evidence | Classification question | Consequence to research |
|---|---|---|
| Adverse operating evidence | Is it held and used, and what is the asset group? | Indicator, recoverability, measurement |
| Approved sale plan and criteria evidence | Are all applicable held-for-sale criteria met, and when? | Measurement, depreciation, presentation, disclosure |
| Control-transfer evidence | Has a sale occurred? | Derecognition, consideration, gain or loss |
| Ceased-use plan | Is abandonment supported, and over what remaining period? | Useful life, allocation, eventual derecognition |
| Fire, theft, taking, or condemnation | Was the asset lost or compulsorily converted? | Asset loss, separate recovery, replacement |
The date matters. Management discussion does not automatically stop depreciation. Held-for-sale classification is not a completed sale. A completed sale is not automatically a discontinued operation.
Held for sale is a criteria-based branch
The packet should address plan approval, immediate availability, and active marketing. It should also support probable timing, a reasonable price, and an unlikely plan change. If those facts are missing, continue the supported held-and-used route and identify the evidence request.
Once classification is supported, apply the measurement and depreciation consequences. For a disposal group, first measure assets and liabilities governed by other Topics under those Topics. ASC 360-10-35-43 then requires the scoped long-lived assets to be measured at the lower of carrying amount or fair value less cost to sell. Stop depreciation while the classification applies. Do not invent either measurement input. Preserve the classification date and later changes. Separately evaluate whether a disposed or held-for-sale component meets the strategic-shift and major-effect condition for discontinued-operation presentation.
Reuse the existing held-and-used and sale bridges
The long-lived-asset module already teaches a bounded held-and-used Topic 360 screen and fair-value loss measurement, plus an ordinary fixed-cash sale to a noncustomer. Link to those schedules rather than treating held for sale as a third line in the same calculation. Each branch has different evidence and timing.
Separate an involuntary loss from recovery
When a fire destroys equipment, derive and derecognize the asset's supported carrying amount at the loss date. Separately analyze whether and when an insurance recovery is recognizable and measurable. Filing a claim, insurer acknowledgment, settlement agreement, and cash collection can occur on different dates.
The conversion is a monetary transaction under ASC 610-30-25-2. If the event-period evidence cannot support the recovery amount, ASC 610-30-25-4 requires research under Topic 450 before recognition. Reinvestment does not defer a supported gain or loss, and the replacement starts with its own consideration.
Replacement equipment is another acquisition. Do not defer the asset loss until replacement, net an unsupported expected recovery against it, or carry the old asset forward because cash has not yet arrived. Business-interruption coverage, contingent gains, taxes, and legal disputes require their own scope.
Exit check
Create timelines for three packets: a proposed sale with incomplete criteria, a planned abandonment after twelve more months of use, and fire destruction with an unsettled insurance claim. For each, state classification, depreciation or allocation consequence, derecognition date, recovery status, cash-flow question, disclosure question, and the facts that remain unresolved.