Accounting: The Language of Business - Vol. 2 (Intermediate: Part 56)

If you do any thriller or horror movie a big part of the process is accounting for the cell phone.

Jaume Collet-Serra

Statements of Net Income and Comprehensive Income (Part K) 

by

Charles Lamson

Discontinued Operations: International Financial Reporting Standards (IFRS)

We first describe the characteristics of discontinued operations under IFRS, noting differences with Generally Accepted Accounting Principles (GAAP or U.S. GAAP), and then outline the specific reporting requirements.

Characteristics of a Component of an Entity: IFRS. Similar to U.S. GAAP, IFRS defines a discontinued operation as a component of a company that it has either disposed of or classified as held for sale. However, IFRS defines a component of discontinued operations differently than U.S. GAAP. Specifically, IFRS requires that a discontinued operation represent a:

• Separate major line of business or geographical area of operations, or

• Subsidiary acquired exclusively with a view to resale.

Additionally, IFRS requires that the discontinued operation be part of a single, coordinated plan to dispose of a separate major line of business or geographical area of operations [IASB, International Financial Reporting Standard 5, "Non-current Assets Held for Sale and Discontinued Operations" (London, UK: International Accounting Standards Board, 2004, Revised), Paragraph 32].

Discontinued Operations Reporting Requirements: IFRS. IFRS income statement reporting is similar to U.S. GAAP. Disclosures under U.S. GAAP and IFRS differ, as noted in Exhibit 5.14.

EXHIBIT 5.14 Criteria and Reporting for Discontinued Operations: U.S. GAAP and IFRS

IFRS reporters include any profit or loss related to discontinued operations on the income statement, net of taxes, on one line. Only one line is reported, and the amount reported is the sum of:

• Income or loss from discontinued operations, net of tax.

• Unrealized loss from remeasurement of net assets held for sale to lower of carrying value and fair value less disposal costs, net of tax.

• Realized gain or loss on disposal of assets or disposal group(s) constituting the discontinued operations, net of tax.

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 192-193*

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