how are gains or loses from discontinued operations recognized on the income statment?
reported separetley from continuing operations in the income statment, reported Net of Tax
what conditions must be met in order to report the result of an operation that has been disposed or listed as held for sale in discontinued operations?
- 1)Eliminated from ongoing operations and
- 2)No significant continuing involvment
what is a component of an entity under US GAAP
part of an entity (the lowest Level) for which operations and cash flow can be clearly distingushed, both operationally and for financial reportng purposes, from the rest of the entity.
what is a component of an entity under IFRS
- under IFRS a component of an entity may be:
- 1) Separate major line of business or geograpical area of operations
- 2) A subsidary acquired exclusiverly with a view to resale
A component of a business(under us GAAP) or a disposal gourp (under IFRS) held for sale in the period in which All the following are met, what are they
- 1) managment commits to plan to sell the component,
- 2) the component is available for immediate sale in its present condition
- 3) an active program to find a buyer has been started
- 5) the sale of the component is probable and is expected to be complted ithin one year
- 6) the sale of the comonent is being activly marketed
- 7) the actions required to complete the sale do not it unlikly that significan changes to the paln will be made or that the plan will be withdrawn.
When is Discontinued operations reported?
cost from discontinued operations are reported in the period in which they occurred.
What items are included in the results of discontinued operations for the period they were incurred?
- 1) Results of operations of the component for the period
- 2) gains or loss on disposal of the component for the period
- 3) impairment loss (and subsequent increases in fair value) of the comonent
when you are determining the cost of discontinued operations how are gains on the sale of the componenet calculated?
a gain is recognized for any subsequent increase in fair value minus the cost to see (but not in excess of the previously recoongized cumulative loss)
when calculating the cost of discontinued operations, how are anticipated future gains or losses treated?
gains or losses anticipated to occur in future periods are not recovnized untile they occur
cost directly related to the disposal of a component are treated how?
cost that are directly related to the disposal of a component of an entity in prioor periods are classified in the current period in discontinued operations
In regards to discontinued operations, in order for a setlement to be consider directly related to a component of an entity it must have?
- 1) Have domonstrated cuase and effect relationship
- 2) Occur no later than one year after the date of the disoposal transacitons
How is a component classified as held for sale measurred?
it is measured at the lower of its carrying amount or fair value less cost to seal
How is disontinued operations presented on the financial statments?
- 1) the results of discontinued operations, net of tax, are reported as a separate component of income before extraodinary items. (this is the D in the IDEA nmonic.)
- 2) the gain or loss recognixed on the disposal shall be discolsed either on the face of the income statments or in the notes to the financiale statments
For Discontinued operations how are liabilities resulting from exit and and disposal activities treated under IFRS and US GAAP?
The new rule under both IFRS and US GAAP requires recognition of liability for the cost assocated with an exit or disposal activity.
what are examples of exit and disposal activities assocated with discontued operations?
- invlontary employee termination benefits
- cost to terminate a contract that is note a capital lease
- cost to relocate employees or consoldadate activities
For Discontinued operations what is the criteria for liability recognition and do all of them have to be meet?
- All of the criter must bee meet which are:
- 1) an ohligating event has occurred
- 2) the event results in a present obligation to transfer assets or to provide serices in the future
- 3) the entity has little or no discretion to avoid the future transfer of assets or providing of services
when do you recognized future operating losses expected to be incurred as part of an exit or disposal activity?
they are recognized in the period or periods incurred
How should liabilities assocated with disposal activities be messured?
the liability should be measured at fair value
where is exit or disposal activity cost that is not assocated with discontinued operations be reported?
cost assocated with an exit or disposal activity related to discontinued operations will be reported in discontinued operations. However, cost not assocated with dis continued operations should be reported in the income from continuing operations section of the Income statment
who is exit and disposal activity treated in the notes of the financial statments?
- all the following must be disclosed in the notes to the financial statements in the period the exit is initated and all subsequent periods un the activity is completed:
- 1) discription of the exit including assocated FACTS
- 2) for each major component of the activityThe total amount of cost expacted to be incurred
- 3) The line item within the incomestatment where the cost are aggregated
- 4) for each reported segement the amount of cost expected to be incurred
- 5) if a liabilty for a cost with the activity is not recognized becuase of fair value con not be estamated the fact and reson why should be explined