Regarding discontinued operations,which of the following statements is correct?
A)Gains and losses on the sale of plant assets are reported as discontinued operations.
B)A loss on discontinued operations is reported with an addition for the applicable income tax.
C)Most analysts include the results of discontinued operations in financial analysis.
D)The disposal of the financing segment of a large corporation would be reported as a discontinued operation.

Question

Quizplus · Accepted Answer

The disposal of a segment or component of an entity that qualifies as a strategic shift that will have a major effect on the entity's operations and financial results is reported as a discontinued operation. This includes the disposal of a major line of business, major geographical area of operations, or a major equity method investment. The financing segment of a large corporation would likely qualify as a major line of business, and thus would be reported as a discontinued operation if it was disposed of. Therefore, option D is the correct answer. Option A is incorrect because gains and losses on the sale of plant assets are reported as part of the regular operating results, not as discontinued operations. Option B is incorrect because a loss on discontinued operations is reported net of any applicable income tax, not with an addition for it. Option C is incorrect because while some analysts may include discontinued operations in their analysis, it is not a common practice as these operations are considered to be one-time events that may not be indicative of ongoing profitability.

Regarding Discontinued Operations,which of the Following Statements Is Correct