Discontinued Operations and Exit/Disposal Activities

Question 1

Discontinued Operations Definition

Answer 1

a company that eliminates the results of operations and cash flows of a component.
- There is no significant continuing involvement in that component
- Amount reported “net of tax”

Question 2

Component of an entity Definition

Answer 2

• segment
• reporting unit
• asset group (not a part of a line of business)
• Whose operations and cash flows are clearly distinguished from the rest of the entity, operationally as well as for financial reporting purposes.

Question 3

Exit Activities include:

Answer 3

• termination benefits (provided to current employees that are involuntarily terminated)
• Costs to terminate a contract that is not a capital lease
• Costs to consolidate facilities and/or relocate employees

Question 4

Where are exit/disposal costs included

Answer 4

income from continuing operations

Question 5

How and when should liability for exit/disposal cost be recognized

Answer 5

Fair Value when the entity has little or no discretion to avoid the future transfer or use of assets to settle the liability

Question 6

Changes in liability for exit/disposal cost should be measured using what

Answer 6

credit-adjusted risk-free rate that was used to measure the liability initially