FASB Issues Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities.Business Editors
NORWALK, Conn.--(BUSINESS WIRE)--July 30, 2002
The Financial Accounting Standards Board Financial Accounting Standards Board (FASB)
Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB
See: Financial Accounting Standards Board
See Financial Accounting Standards Board (FASB). ) has issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance The act of dividing, or the state of being divided.
The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs that are associated with a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , discontinued operation discontinued operation
A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. , plant closing, or other exit or disposal activity.
Previous accounting guidance was provided by EITF EITF Emerging Issues Task Force
EITF Edinburgh International Television Festival
EITF Europe International Taekwon-Do Federation Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Statement 146 replaces Issue 94-3.
In commenting on the standard, Linda A. MacDonald, FASB Project Manager, stated "Liabilities represent present obligations to others. Because a commitment to a plan, by itself, does not create a present obligation to others, the principal effect of applying Statement 146 will be on the timing of recognition of costs associated with exit or disposal activities. In many cases, those costs will be recognized as liabilities in periods following a commitment to a plan, not at the date of the commitment."
Statement 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.
The Statement may be ordered from the FASB website at www.fasb.org or by telephoning the FASB's Order Department at 800-748-0649.
About the Financial Accounting Standards Board (FASB)
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants With over 330,525 CPA members (in August 2006), the American Institute of Certified Public Accountants (AICPA) is the largest professional organization of Certified Public Accountants (CPAs) in the United States of America. . Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together and others rely on credible, transparent and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.
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