Reference no: EM132669760

Question - On June 15, 2015, TCP Inc. a subsidiary consolidated by LVG in accordance with FASB Accounting Standards Codification (ASC) Topic 810-10, Consolidation: Overall ("ASC 810-10"), filed for reorganization under Chapter 11 of the Bankruptcy Code. Although LVG retains its 75 percent ownership interest, the court controls TCP as of the bankruptcy event.

Because LVG has lost control, in the second quarter of 2015, it uses the cost method to account for its investment in TCP upon deconsolidation in accordance with ASC 810-10 (the "deconsolidation event").

LVG anticipates some level of ownership or involvement in TCP upon TCP's emergence from bankruptcy.

As a result of the deconsolidation event, LVG evaluates whether TCP's historical operations should be presented as discontinued operations for the quarter ending on June 30, 2015. Before the deconsolidation event, TCP represented approximately 45 percent of the carrying value of LVG's total consolidated assets, 65 percent of total consolidated liabilities, and 55 percent of total consolidated revenue; therefore, TCP represented a significant portion of LVG's consolidated operations.

While TCP holds 25 properties, LVG continues to own and operate approximately 10 gaming and resort properties (collectively, the "LVG properties"). The LVG properties are located in the same geographic areas as the TCP properties and have similar operating characteristics and profitability profiles. The LVG properties and TCP properties continue to be operated with the LVG brand name and managed by LVGM during the bankruptcy.

Assume the following in evaluating this case:

TCP represents a "disposal group" as defined in the ASC Master Glossary.

TCP meets the definition of a "component of an entity" in the ASC Master Glossary.

The deconsolidation event represents a disposal by means other than sale in accordance with ASC 360-10-45-15. While ASC 360-10-45-15 provides the specific examples of abandonment or distribution to owners in a spin as disposals other than by sale, the deconsolidation event is analogous to abandonment in which legal title of TCP is retained by LVG but LVG effectively loses control and significant influence over the entity because of bankruptcy court and the bankruptcy proceeding.

Required - Should LVG report TCP's operations as discontinued operations as of June 30, 2015, in accordance with ASC 205-20?