Cash flows from discontinued operations included depreciation and amortization of $19 million, $30 million, and $36 million for the years ended December 31, 20X2 and December 26, 20X1 respectively, as well as capital expenditures of $9 million, $19 million, and $27 million for the years ended December 31, 20X2 and December 26, 20X1, respectively.
Example 2.8: Note—Discontinued Operation—Not a Strategic Shift
In fiscal year 20X7, we expanded into container shipping services as a new business sector to provide related transportation logistics services to customers in the United States and in Canada. We have signed cooperation agreements with ShipCo Canada to provide freight logistics services and container shipping services to them in the United States. To ensure effective and high‐quality services provided to our customers in the United States, we established a joint venture, LRB Shipping Center Corp., in the second quarter of fiscal 20X7 with a U.S. local freight forwarder, Meta Global Logistics Inc. The joint venture ended in December 20X7 and we continue to operate shipping business through our other subsidiaries. Since LRB Center's operating revenue was less than 1% of the Company's consolidated revenue and the termination did not constitute a strategic shift that would have a major effect on the Company's operations and financial results, the results of operations for LRB Center was not reported as discontinued operations in the financial statements.
Example 2.9: Basis of Presentation—Liquidation Basis of Accounting
As a result of poor performance and lack of new capital contributions, XYZ Company has determined that liquidation was imminent as of June 1, 20X1 and adopted the liquidation basis of accounting at that date. XYZ calculated the net asset balances as of June 1 and presented a statement of changes in net assets as of June 30. The company adjusted the beginning balance of net assets as of June 1, 20X1 when preparing its quarterly report. Assets have been measured and are presented at the amounts of cash proceeds that the Company expects to get from liquidation. The Company has presented its internally developed trade name and other intellectual property assets which were not previously recognized under generally accepted accounting principles (GAAP), but are recognized under the liquidation basis of accounting. The company has also accrued for costs it expects to incur during the liquidation process.
Example 2.10: Statement of Net Assets in Liquidation
XYZ Company Statement of Net Assets in Liquidation As of June 30, 20X1
| Assets | |
| Cash and cash equivalents at carrying value | $ 3,300 |
| Trade receivables, Net | 1,536 |
| Property, plant, and equipment, Net | 6,518 |
| Liquidation basis of accounting, Items previously not recognized | 818 |
| Total Assets | $12,172 |
| Liabilities | |
| Accounts payable | $216 |
| Taxes payable | 66 |
| Notes payable | 450 |
| Due to related parties | 348 |
| Estimated costs to liquidate | 32 |
| Total liabilities | 1,112 |
| Net assets | $11,060 |
Practice Pointer: Notice that in the example above, the entity initially measures its assets to reflect the amount it expects to receive in cash or other consideration. The assets include items previously unrecognized, like trademarks and patents that the company expects to sell. These are valued in the Statement of Net Assets at the amounts of proceeds the entity expects to realize. Assets are reported gross. The costs to dispose of the assets are presented separately in estimated costs to liquidate. The statement is unclassified and presents the total net assets in liquidation.
Example 2.11: Statement of Changes in Net Assets in Liquidation
XYZ Company Statement of Changes in Net Assets in Liquidation for the Period June 1, 20X1 through June 30, 20X1
| Net assets as of June 1, under liquidation basis | $18,574 |
| Adjustment for accrued liquidation costs | (8,795) |
| Net assets adjusted as of June 1, 20X1 under liquidation of accounting | 9,779 |
| Net operations | 5,187 |
| Liquidation basis of accounting remeasurement loss on accrued costs to dispose of assets and liabilities | (668) |
| Subsequent period remeasurement adjustment on assets | 2,927 |
| Liquidation basis of accounting remeasurement loss on items previously not recognized | (527) |
| Net assets as of June 30, 20X1 under liquidation basis | $16,030 |
Example 2.12: Note—Liquidation Is Imminent
Liquidation of Company As a result of poor performance and lack of new capital contributions, the Company's Board of Directors concluded in a meeting held September 18, 20X0 that the implementation of a Formal Plan of Complete Dissolution and Liquidation is in the best interest of the Company and its shareholders. Subsequently, the Plan was submitted to ABC's shareholders as of October 28, 20X0 for approval at the Company's annual meeting held on December 4, 20X0. The Plan of Complete Dissolution and Liquidation was approved by the shareholders at the annual meeting.
Plan of Liquidation As a result of the adoption of the Plan of Complete Dissolution and Liquidation, ABC's activities are now limited to: selling, collecting, or otherwise realizing the value of its remaining assets; making tax and other regulatory filings; winding down the Company's remaining business activities; paying (or adequately providing for the payment) of valid creditor claims and obligations; and making liquidation distributions to ABC's shareholders.
Currently,
