BBMF3063 T8Q2.docx - BBMF3063 T8 2 Describe the accounting treatment for discontinued operations How should an analyst treat discontinued operations To

BBMF3063 T8Q2.docx - BBMF3063 T8 2 Describe the accounting...

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BBMF3063 T8 2 Describe the accounting treatment for discontinued operations. How should an analyst treat discontinued operations? To qualify as discontinued operations, the assets and business activities of the divested segment must be obviously distinguishable from the assets and business activities of the remaining entity. Accounting and reporting for discontinued operations is two-fold. First, the income statement for the current and prior two years are restated after excluding the effects of the discontinued operations from the line items that determine continuing income. Second, gains or losses pertaining to the discontinued operations are reported separately, net of related tax effects. An analyst should separate and ignore discontinued operations in predicting future performance and financial condition.

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