F-1 REPORTING N/I & DISCONTINUED OPERATIONS:

Question 1

Q: What is the presentation order of the major components of an income and retained earnings statement?

Hint: “IDEA”

FAR 1-15

Answer 1

Income Statement:
• Income (or loss) from continuing operations

• Income (or loss) from Discontinued operations
• Extraordinary items

Retained Earnings Statement:
• Cumulative effect of a change in Accounting principle

Question 2

Q: The gain (loss) from discontinued operations can consist of …

FAR 1-16

Answer 2

An impairment loss,

a gain (loss) from actual operations,

and a gain (loss) on disposal.

Question 3

Q: **In what period are the following reported: **

• An impairment loss?
• A gain (loss) from actual operations?
• A gain (loss) on disposal?

FAR 1-17

Answer 3

A: All are reported in the period in which they occur.

Question 4

Q: In reporting discontinued operations, how is a “component” of an entity defined under U.S. GAAP and IFRS?

FAR 1-18

Answer 4

U.S. GAAP

1. An operating agreement
2. A reportable segment
3. A reporting unit
4. A subsidiary
5. An asset group

IFRS

1. A separate major line of business or geographical area of operations
2. A subsidiary acquired exclusively with a view to resale

Question 5

Q: How do we account for subsequent increases in the fair value of a discontinued component?

FAR 1-19

Answer 5

• A gain is recognized for the subsequent increase in fair value minus costs to sell (but not in excess of the previously recognized cumulative loss).
• The gain is reported in the period of increase.

Question 6

EXIT OR DISPOSAL ACTIVITIES

Q: What types of costs are associated with exit and disposal activities?

FAR 1-20

Answer 6

• Involuntary employee-termination benefits.
• Costs to terminate a contract that is not a capital lease.
• Other costs associated with exit or disposal activities.