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39. Amend paragraph 350-20-55-3 and its related heading, with a link to transition paragraph 350-10-65-1, as follows:

  • >

    > The Component Constitutes a Business or a Nonprofit Activity

350-20-55-3 The determination of whether a component constitutes a business or a nonprofit activity requires judgment based on specific facts and circumstances. The guidance in Section 805-10-55 should be considered in determining whether a group of assets constitutes a business or a nonprofit activity.


Amend paragraph 350-20-55-7, with a link to transition paragraph 350-10-

65-1, as follows:

350-20-55-7 In determining whether the components of an operating segment have similar economic characteristics, all of the factors in paragraph 280-10-50- 11 should be considered. However, every factor need not be met in order for two components to be considered economically similar. In addition, the determination of whether two components are economically similar need not be limited to consideration of the factors described in that paragraph. In determining whether components should be combined into one reporting unit based on their economic similarities, factors that should be considered in addition to those in that paragraph include but are not limited to, the following:

  • a.

    The manner in which an entity operates its business or nonprofit activity and the nature of those operations

  • b.

    Whether goodwill is recoverable from the separate operations of each component business (or nonprofit activity) or from two or more component businesses (or nonprofit activities) working in concert (which might be the case if the components are economically interdependent)

  • c.

    The extent to which the component businesses (or nonprofit activities) share assets and other resources, as might be evidenced by extensive transfer pricing mechanisms

  • d.

    Whether the components support and benefit from common research and development projects.

The fact that a component extensively shares assets and other resources with other components of the operating segment may be an indication that the component either is not a business or nonprofit activity or it may be economically similar to those other components.

41. Add paragraph 350-10-65-1 and its related heading, with no link to a transition paragraph, as follows:


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