Exit or Disposal Fees and Discontinued Operations

Question 1

When and how should one time termination costs be recognized and measured?

Answer 1

Measured at Fair Value

Recognized at the Communication Date

Question 2

Where is Discontinued Operations presented?

Answer 2

separate section of the income statement after income from continuing operations

Question 3

When is Discontinued operations determined?

Answer 3

when it’s classified for sale or has actually been disposed of

Question 4

Examples of Discontinued Operations are

Answer 4

a sale of a product line that represents 15% of the entity’s total revenues;
a sale of a geographical area that represents 20% of the entity’s total assets;
a sale of the entity’s stores in one of its two types of store formats that have provided 15% of current-period net income and have, in the past, represented 30% to 40% of the entity’s net income;
the sale of an equity method investment representing 20% of the entity’s total assets; or
the sale of 80% of a product line representing 40% of total revenue, but only if the entity retains 20% of its ownership interest.

Question 5

What is the rule for recognizing estimated losses and gains on Discontinued Operations?

Answer 5

Losses Recognized immediately

Gains Recognized on the day of sale.