Discontinued Operations

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Reporting of Discontinued Operations

You should separately report the results of the operations of a component of an entity if it has either been disposed of or is classified by the entity as held for sale. More specifically, a discontinued operation is one where the operations and cash flows of the operation either have been or will be eliminated from the ongoing operations of the entity, and the entity will not have any significant continuing involvement in its operations after the disposal is complete. An example of the presentation of a discontinued operation follows:

Income from continuing operations before income taxes	$100,000
Income taxes	(30,000)
Income from continuing operations		$70,000

Discontinued operations
Loss from operations of discontinued business component		(15,000)
Income tax benefit		5,000
Loss on discontinued operations		(10,000)
Net income		$60,000

Additional Discontinued Operations Disclosure Rules

If there is a recognized loss on the disposal of a discontinued operation, then disclose it either on the face of the income statement or in accompanying notes.

If you adjust an amount previously reported in discontinued operations, and that is directly related to the disposal of an entity component from a prior period, then classify it separately in the current period, within discontinued operations. Such a situation may arise when an entity resolves contingencies related to the terms of a disposal transaction.

You should also allocate to discontinued operations the interest on any debt to be assumed by the buyer, as well as any debt that is to be repaid as a result of the disposal transaction.

Do not allocate general corporate overhead to a discontinued operation.