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Case $2$ Quit While You're Ahead

House Rules Inc. $($HR$)$ is a public gaming company with a quarterly reporting period of June $30,2015.$

On June $15,2015,$ Royal Flush Inc. $($RF$),$ a subsidiary consolidated by HR 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 HR retains its $75$ percent ownership interest, the court controls RF as of the bankruptcy event.

Because HR has lost control, in the second quarter of $2015,$ it uses the cost method to account for its investment in RF upon

deconsolidation in accordance with ASC $810-10($the "deconsolidation event"$).$ HR anticipates some level of ownership or

involvement in RF upon RF$\text{'}$s emergence from bankruptcy.

RF historically comprised HR$\text{'}$s operating casinos $($including the hotels, underlying land, and related intangibles$)$; it has the

same fiscal year as HR$.$ RF provides casino entertainment services and owns, operates, or manages $25$ gaming and resort

properties $($collectively$,$ the $"$RF properties"$).$ Through a related$-$party management services agreement, HR Management

Inc. $($HRM$),$ an indirect subsidiary of $HR,$ historically provided all of RF$\text{'}$s operating services, including management and

employees.

As a result of the deconsolidation event, HR evaluates whether RF$\text{'}$s historical operations should be presented as

discontinued operations for the quarter ending on June $30,2015.$ Before the deconsolidation event, RF represented

approximately $45$ percent of the carrying value of HR $\text{'}$s total consolidated assets, $65$ percent of total consolidated liabilities,

and $55$ percent of total consolidated revenue; therefore, RF represented a significant portion of HR$\text{'}$s consolidated

operations.

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While RF holds $25$ properties, HR continues to own and operate approximately $10$ gaming and resort properties

$($collectively$,$ the $"$HR properties"$).$ The HR properties are located in the same geographic areas as the RF properties and

have similar operating characteristics and profitability profiles. The HR properties and RF properties continue to be operated

with the HR brand name and managed by HRM during the bankruptcy.

Assume the following in evaluating this case:

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

RF 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 RF is

retained by $H{R}_{?}$ but HR effectively loses control and significant influence over the entity because of the bankruptcy

court and bankruptcy proceedings.

Required:

Should HR report RF$\text{'}$s operations as discontinued operations as of June $30,2015,$ in accordance with ASC $205-20?$