Cash from Divestitures

Category

Cash Flow

Units

Currency

US-GAAP elements

ProceedsFromDivestitureOfBusinessesNetOfCashDivestedProceedsFromDivestitureOfBusinessesProceedsFromDivestitureOfBusinessesAndInterestsInAffiliates

Reference

ASC 230, Statement of Cash Flows (investing activities); ASC 810 (deconsolidation)

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Cash from divestitures is the cash a company received during a period from selling a business, such as a subsidiary, division, product line, or segment, or from selling an interest in an affiliate. It is an inflow in the investing section of the cash flow statement and is typically reported net of any cash the sold business held when it left the group.

It covers sales of operating businesses. Sales of individual assets, such as equipment or a single patent, are reported separately.

When a company sells a subsidiary and loses control, it deconsolidates the business under ASC 810 and recognizes a gain or loss. ASC 230 treats the cash received as an investing inflow. In XBRL, companies usually tag it ProceedsFromDivestitureOfBusinessesNetOfCashDivested, or ProceedsFromDivestitureOfBusinesses when cash divested is shown separately. ProceedsFromDivestitureOfBusinessesAndInterestsInAffiliates is used when the line also includes sales of equity-method stakes and other non-controlling interests. The gain or loss on the sale is reversed out of net income in the operating section, so the full proceeds are counted only here.

A divestiture is not always a discontinued operation. A sale qualifies for discontinued-operations reporting only if it represents a strategic shift with a major effect on the company's results. Smaller sales run through continuing operations. Either way, the cash price usually appears here. Deferred or contingent proceeds are recorded when received, and seller notes or retained stakes in the sold business are noncash parts of the consideration that do not appear in this line. Taxes on a gain are paid out of operating cash flow, which can make operating cash flow look weak in the year of a large sale.

Analysts treat divestiture proceeds as a one-time source of cash. What matters is how the cash is used, whether to repay debt, repurchase shares, or fund acquisitions, and what earnings and cash flow the company gave up. Comparing proceeds with the sold unit's historical cash flow helps judge whether the price was attractive.