when does a discontinued operation occur?

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Expert Solution

Discontinued operations is concerned with a particular product line or a particular business which is now made to shut down or is closed.

These discontinued operations are also reflected in the income statement but they are made to be stated separately from the operations which are going on.

This occurs when the the cash flow from a particular product or business or operations related to the business or any product has been made to rove from the ongoing or current operations going on.

May be because the particular line has been disposed of or may it has been declared for ready to sale.

There are several reasons why a firm stops or duscontinues a particular product line or business line. May the particular is incurring regular losses or it has nor been profitable anymore to invest in that line. It is also possible that the owner sees no future growth of that product or component and hence decides to dispose it. In this way a firm decides when to close down a unit.

These units being closed down are reported separately. If there is any loss incurred in disposing off or selling that unit, it should also be reported against the department or component that is facing the loss even if that particular department is ongoing but notes should be made separately, it should always be kept in mind.

ekkarill92 answered 1 year ago

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