What are the Risks regarding Discontinued Business 1657



  • If part of business (Insurance Company) are discountinued what would be the RISKS and CONTROLS specifically in relation to SOX

    1. What are the risks of not identifying discountinued activies?
      E.g Liabilities not reported
    2. What would be some of the controls that would ensure all discontinued business are identified.
      E.g All discontinued activities authorised by directors




  • Thanks for information Milan.
    In addition I was looking for specific RISKS and CONTROLS relating to discontinued activities.
    E.g What are the risks of not identifying discontinued activities.



  • The relevant risks pertain to disclosure requirements since amounts and other information related to discontinued operations are presented in the financial statements.
    Some items for consideration (these were obtained from IFRS), but should be similar to US GAAP for reference purposes and might be helpful to develop a risk and controls matrix for disclosure reporting of discontinued operations.

    An entity shall present and disclose information that enables users of the financial statements to evaluate the financial effects of discontinued operations and disposals of non-current assets (or disposal groups).
    Presenting discontinued operations
    An entity shall disclose the following.
    A single amount on the face of the income statement comprising the total of:
    the post-tax profit or loss of discontinued operations, and
    the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.
    An analysis of the single amount in 1 into:
    the revenue, expenses and pre-tax profit or loss of discontinued operations;the related income tax expense as required; the gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation, and the related income tax expense.

    The analysis may be presented in the notes or on the face of the income statement. If it is presented on the face of the income statement it shall be presented in a section identified as relating to discontinued operations, i.e., separately from continuing operations.
    The analysis is not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition. The net cash flows attributable to the operating, investing and financing activities of discontinued operations. These disclosures may be presented either in the notes or on the face of the financial statements. These disclosures are not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition.
    An entity shall re-present the disclosures above for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the balance sheet date for the latest period presented.
    Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period shall be classified separately in discontinued operations. The nature and amount of such adjustments shall be disclosed.
    If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations shall be reclassified and included in income from continuing operations for all periods presented. The amounts for prior periods shall be described as having been re-presented.
    Hope this further helps,
    Milan



  • Thank you, information very helpful 🙂


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