The Mohegan Tribe is a federally recognized Native American tribe with an approximately 405-acre reservation located in southeastern Connecticut. Under the Indian Gaming Regulatory Act of 1988, or IGRA, federally recognized Native American tribes are permitted to conduct full-scale casino gaming operations on tribal land.
In October 1996, the tribe opened a gaming and entertainment complex known as Mohegan Sun. The tribe substantially completed a major expansion of Mohegan Sun known as Project Sunburst. The first phase of Project Sunburst, the Casino of the Sky, which included increased gaming, restaurant and retail space, and an entertainment arena, opened on September 25, 2001. The remaining components, including the majority of a 1,200-room luxury hotel and approximately 100,000 square feet of convention space, opened in April 2002 with substantial completion of construction occurring in June 2002. Gambling operations include slot machines, table games, off-track wagering, and (until recently) bingo.
Loss from discontinued operations for a recent fiscal year was $591,000. The loss was the result of the Tribe's decision to cease bingo operations to convert the floor space into the 637-
unit Hall of the Lost Tribes smoke-free slot machine venue. The loss related to severance pay and disposal of bingo inventory.
Required:
1. Review SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”
using the FASB’s Financial Accounting Research System (FARS), PricewaterhouseCooper's Comperio® authoritative financial reporting database, or other reference sources in your local library. Does the loss referenced here qualify as a loss from discontinued operations?
Explain your answer citing relevant paragraphs from SFAS No. 144.
2. Would the loss qualify as a loss from discontinued operations if the Tribe had turned the bingo operation over to the Mohawks? The Mohawks do not currently have a casino on their tribal lands but are considering getting into the business. To gain experience with casino operations, the Mohawks have arranged with the Mohegan Tribe to take over the bingo operation at Mohegan Sun for an indefinite period. While the bingo profits will go to the Mohawks, the Mohegan Tribe will pay facilities rent and a training fee of 10% of gaming revenues. Again, explain your answer citing relevant paragraphs from SFAS No. 144.