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Unformatted text preview: Memorandum To: Chief Executive Officer of Auto King From: Controllers John Doe Date: 2/22/12 Re: Recommendation for proper reporting of the sale of Service Centers in the financial statements Per your request, this memo includes our recommendation for the treatment of the Service Centers operation in Auto Kings second quarter 2007 financial statements. Our recommendation is to report the Service Centers operation as a discontinued operation in Auto Kings second quarter 2007 financial statements. Alternatives and Analysis Two alternatives are available for recording the sale of the service center: 1) recognize it as a discontinued operation, 2) record the sale as a normal part of continuing operations. In support of alternative 1, proponents could refer to ASC 205-20-45-1. According to ASC 205-20-45-1, the result of operations of a component of an entity that has either been disposed of, or is classified as held for sale must be reported in discontinued operations if two conditions are met: a. The operations and cash flows of the component reported in discontinued operations if two conditions are met: a....
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- Spring '10