What is the accounting treatment for discontinued operations?

Key Takeaways. Discontinued operations is an accounting term for parts of a firm’s operations that have been divested or shut down. They are reported on the income statement as a separate entry from continuing operations.

How do you record discontinued operations?

Add the profit or loss from the discontinued operation to the gain or loss on the disposal. Record this amount next to the “gains or losses from discontinued operations, including disposal” line. Calculate the tax-adjusted gain or loss from discontinued operations.

Is Discontinued Operations an operating activity?

Discontinued operations are reported in a separate line item in the income statement and are not part of the ongoing operational activities. Income generated from these operations is therefore not included in operating profit and EBIT.

Is Discontinued operations an extraordinary item?

APB 30 required that discontinued operations be reported as a separate line item on the income statement, net of tax effects, but not as an extraordinary item.

How do you show discontinued operations on a balance sheet?

“In the period(s) that a discontinued operation is classified as held for sale and for all prior periods presented, the assets and liabilities of the discontinued operation shall be presented separately in the asset and liability sections, respectively, of the statement of financial position.”

How do you present discontinued operations on a balance sheet?

What items must be removed from continuing operations and reported separately for a discontinued operation?

All related revenues, expenses, gains, and losses must be removed from continuing operations.

How should EPS be disclosed in the financial statements?

Generally accepted accounting principles also require that earnings per share be disclosed on the face of the income statement and that the specific dollar amounts associated with (1) net income from continuing operations (after tax), (2) disposals of business segments, (3) extraordinary items, and (4) changes in …