Question

Which of the following describes the proper treatment of discontinued operations on the income statement.

Answer 1

Answer:

C. Discontinued operations are a separate line item reported net of tax.

Explanation:

In the United States of America, the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) usually considers or acknowledges material losses that are unusual in character incurred by businesses. It is necessary to report items that are unusual in character because it gives auditors or financial experts clarity on which profits or losses are not related to the operation of the business.

Discontinued operations can be defined as the income statement category that is used for reporting a disposal of a component of a business.

According to the GAAP, the proper treatment of discontinued operations on the income statement is that discontinued operations are a separate line item reported as a net of tax.

On the other hand, the income from continuing operations is a net income from an organization's continuous operation.