F1 - M5 - Income Statement – Discontinued Operations

Question 1

Discontinued Operations

Answer 1

“3rd” section of I/S (after continued operations), “separately” from continuing operations, “NET OF TAX”

• Component or “Group” of components
• Could be Impairment loss, gain or loss from actual operations, gain or loss on disposal
• Period in which they occur

Question 2

Component of an entity

Answer 2

part / “lowest” level operations / cash “clearly” distinguished (Operationally and Financial reporting)

• Operating segment, reportable segment, reporting unit, subsidiary, asset group

Question 3

Held for Sale

Answer 3

In period if ALL met

• Management “commits” to a plan to sell
• “available for immediate sale” in “present” condition
• “active” program to locate buyer
• “probable” sale will happen in one year
• “actively” marketed
• When “classified as held for sale, an IMPAIRMENT ANALYSIS MUST BE CONDUCTED

Question 4

Accounting Rules

Answer 4

component reported in discontinued operations if “Disposed” or “Held for Sale”

Question 5

Conditions “Must” be present

Answer 5

if disposal represents “strategic” shift or have major impact on entities operations

• Disposal of geographical area
• Disposal of equity method investment
• Disposal of major line of business

Question 6

Calculations

Answer 6

• Results of operation
• Gain or loss on disposal
• Impairment loss of component
  o Initial and subsequent loss – SP/NRV (SP – Costs to sell) LESS BV (CV)
   Increase in fair value minus costs to sell (bidding war, later on) – Reversal allow, BUT not in excess of loss
• Depreciation and amortization – STOPS
• Anticipated “Future” gains and losses – reported in year of sale
• Measurement and Valuation – “LOWER” of CV or NRV (FV – costs to sell)

Question 7

Presentation and disclosure

Answer 7

“Separate” component of income, category 3, NET OF TAX, face of I/S or notes