F1 M5

Question 1

What amounts/items are included in discontinued operations

Answer 1

Amounts/items included in discontinued operations: Impairment loss, gain/loss from
actual operations, and a gain or loss on disposal

Question 2

Discontinued ops calculation:

Answer 2

Discontinued ops calculation: (1) results of operation of the component for the year of
the IS, (2) gain or loss on disposal of the component for the year of the sale only (3)
impairment loss (and subsequent increases in fair value) of the component upon held for
sale (in the year the disc ops is first recorded)

Question 3

A component or group of components is recognized in disc ops if…

Answer 3

A component or group of components is recognized in disc ops if the disposal
represents a “strategic shift” that has or will have a major effect on an entity’s operations
and financial results (ex: disposal of a major geographical area, major equity method
investment, or major lines of business)

Question 4

Depreciation and amortization of products stops once…

Answer 4

Depreciation and amortization of products stops once mgt decides to dispose of the
component

Question 5

If asset is recognized as a disc op and is sold in the same year that it was recognized as
one, I would do what?

Answer 5

If asset is recognized as a disc op and is sold in the same year that it was recognized as
one, I would do income from continuing operations -/+ impairment loss (or plus a gain) -
/+ loss (plus) from operations for disc ops component for the year -/+ loss (gain) from
sale of disposal

Question 6

If asset is recognized as a disc op and is sold in a following year from when it was
recognized, I would only need to…

Answer 6

If asset is recognized as a disc op and is sold in a following year from when it was
recognized, I would only need to recognize impairment loss (gain) from the first year that
it is recorded as a disc op and loss (gain) from operations for disc ops component for the
year

Question 7

How do I find the impairment loss

Answer 7

To find the impairment loss, do NRV (CV - costs to sell) - FV of component

Question 8

When will the FV become a new CV and why?

Answer 8

The FV (which will most likely be a loss) recorded in the first year that the disc op is
recorded (year impairment loss is recorded) will become the new CV to determine how
much the gain or loss is from disposal of the disc ops component (SP-CV) when it is sold

Question 9

For every calculation in disc ops, I have to to do what? And what will this give me?

Answer 9

For every calculation in disc ops, I have to multiply it by the tax rate (1-T) since it comes
after income tax exp

This will then give me NI for comp as a whole