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Income Statement: Discontinued Operations (Discounted Operations…
Income Statement: Discontinued Operations
Discontinued Operations
Reported
separately
from
continuing operations
in the I/S
Component of an Entity
clearly distinguished (both operationally and for financial reporting purposes)
Held for Sale
- planned to be sold, available for immediate sale, active search for buyer, sale is probable and expected within 1 yr, and actively marketed
impairment analysis of the component must be performed
Accounting Rules
Types of Entities to be Considered
- has been disposed or classified
"held for sale"
Conditions to be Present
- reported on Discontinued Operations if disposal represents strategic shift
must have a major effect in operations:
disposal of major geographical area
major equity method inventory
or major line of business
Discounted Operations Calculations
types of items included:
results of operations
gain/loss on disposal of component
impairment loss (& subsequent increase in FV) of component
depreciation and amortization stops once discontinued
Anticipated Future G/L
gain or loss not previously recognized that results from the sale of the component is recognized at date of sale (not before)
Measurement and Valuation
- held for sale measured at lower of BV or FV
Present as separate component of income
(below income from continuing operations)
All Part of Accounting Rules