CLASS QUESTIONS4AMWF - by their uusual nature and by the...

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CLASS QUESTIONS (4A) 1. What is a discontinued operation? Give an example other than the ones provided in your text (does not have to be an actua l example; you may create one). Occurs when two things happen: a company eliminates the results of operations and cash flows of a component from its ongoing operations, and there is no significant continuing involvement in that component after the disposal transaction. Example: I have a company where I can distinguish the cash flows and operations from the rest of the company. This is also known as a component. If I were to get rid of the component, then it would be a discontinued operation. 2. What criteria must an item meet to be reported as an extraordinary item? How does GAAP differ from IFRS for extraordinary items (see International Insight)? Extraordinary items are events and transactions that are distinguished
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Unformatted text preview: by their uusual nature and by the infrequency of their occurrence. Classifying an event or transaction as an extraordinary item requires meeting both of the following criteria: 1. Unusual Nature: The underlying event or transaction should possess a high degree of abnormality and be of a type of clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the company, taking into account the environment in which it operates. 2. Infrequency of Occurrence. The underlying event or transaction should be of a type that the company does not reasonably expect to recur in the foreseeable future, taking into account the environment in which the company operates. Special reporting for extraordinary items is prohibited under international financial reporting standards....
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This note was uploaded on 09/02/2011 for the course MGT 3305 taught by Professor Reed during the Spring '08 term at Baylor.

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