FRF7
Syllabus B. ACCOUNTING FOR TRANSACTIONS IN FINANCIAL STATEMENTS B9. Reporting financial performance

B9a. Discontinued Operation 1 / 12

Syllabus B9a)

Discuss the importance of identifying and reporting the results of discontinued operations.[

An analysis between continuing and discontinuing operations improves the usefulness of financial statements.

When forecasting ONLY the results of continuing operations should be used.

Because discontinued operations profits or losses will not be repeated.

What is a discontinued operation?

  1. A separate major line of business or geographical area

    or..

  2. is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area

    or..

  3. is a subsidiary acquired exclusively with a view to resale

How is it shown on the Income Statement?

The PAT and any gain/loss on disposal

  • A single line in I/S

How is it shown on the SFP?

If not already disposed of yet?

  • Held for sale disposal group

How is it shown on the cash-flow statement?

  • Separately presented

  • in all 3 areas - operating; investing and financing

No Retroactive Classification

IFRS 5 prohibits the retroactive classification as a discontinued operation, when the discontinued criteria are met after the end of the reporting period