A manufacturer's board approves a plan to sell an idle factory. The company has an active program in place to locate a buyer, has listed the factory at a price reasonable in relation to its current fair value, and expects the sale to complete within a year, but has not yet obtained a signed purchase agreement or firm buyer commitment. Under ASC 360-10-45, can the factory be classified as held for sale at the balance sheet date?
- No, because a binding sale agreement or buyer commitment is required before held-for-sale classification is permitted
- Yes — all of the ASC 360-10-45-9 criteria can be met without a signed agreement: management is committed to a plan to sell, the factory is available for immediate sale, an active buyer search is underway, the price is reasonable, and the sale is probable within one year with no expected significant changes to the plan
- No, because held-for-sale classification also requires the board's approval to be filed with the SEC before the balance sheet date
- Yes, but only if the factory is simultaneously reclassified as a discontinued operation in the same period
Why B? And why not the others?
Correct answer: B. Yes — all of the ASC 360-10-45-9 criteria can be met without a signed agreement: management is committed to a plan to sell, the factory is available for immediate sale, an active buyer search is underway, the price is reasonable, and the sale is probable within one year with no expected significant changes to the plan
ASC 360-10-45-9 sets out six criteria for held-for-sale classification: management commits to a plan to sell, the asset is available for immediate sale in its present condition, an active program to locate a buyer has been initiated, the sale is probable and expected to complete within one year, the asset is being actively marketed at a price reasonable in relation to its current fair value, and it is unlikely the plan will be significantly changed or withdrawn. None of these require a signed purchase agreement or buyer commitment, which would mean the sale has effectively already happened rather than being merely probable. Option A invents a binding-agreement precondition that isn't part of the six criteria. Option C confuses this accounting classification with unrelated securities-filing obligations. Option D wrongly conflates held-for-sale classification with discontinued-operations reporting, which is governed by separate criteria under ASC 205-20 requiring a strategic shift with a major effect on operations.
Source: FASB ASC 360-10-45-9 (criteria for classification as held for sale)