When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as: 1. an amount after continuing operations.
Discontinued operations shall be shown as a line item after gross income with the related tax being shown as part of income tax expense.
When a company discontinues and disposes of a component segment of its operations, the gain or loss from disposal should be reported as: a special item after continuing operations and before extraordinary items. 6.
APB 30 required that discontinued operations be reported as a separate line item on the income statement, net of tax effects, but not as an extraordinary item.
When the discontinued component is sold before the end of the reporting period, the reported income effects of the discontinued operation will include what two elements? Income or loss from operations of the component from the beginning of the reporting period to the disposal date.
Key Takeaways. Discontinued operations is an accounting term for parts of a firm's operations that have been divested or shut down. They are reported on the income statement as a separate entry from continuing operations.
The tax rate is 40%. What is the total income tax effect of the discontinued operations? When a discontinued operation is sold before the end of the reporting period, the or from operations and the gain or loss on the disposal of assets is included in the reported income.
Add the profit or loss from the discontinued operation to the gain or loss on the disposal. Record this amount next to the "gains or losses from discontinued operations, including disposal" line. Calculate the tax-adjusted gain or loss from discontinued operations.
All related revenues, expenses, gains, and losses must be removed from continuing operations.
Parts of a company's business or product line will typically be classified as a discontinued operation if they are no longer operational, have been removed from the company, or have been, or will be sold (referred to as being “held for sale”).
In the period(s) that a discontinued operation is classified as held for sale and for all prior periods presented, the assets and liabilities of the discontinued operation shall be presented separately in the asset and liability sections, respectively, of the statement of financial position.
Income and expenses related to discontinued operations can be found on line items on a company's income statement, below “Continuing Operations Income” and above “Net Income”.