Question

Where would discontinued operations be listed on a balance sheet?

What are the different inventory methods?

Answer 1

1) Discounted operations occurs when a certain product line or segment in the companies business has been sold, abandoned or disposed off.

Discounted operations are reported under GAAP when specific conditions are met :

The component which has been disposed off should be completely removed from the companies operations.

upon the completion of the removal of the component or asset, the disposing company has no continuing involvement with the item.

0 In the period(s) that a discontinued operation is classified as held for sale and for all prior periods presented, the assets and liabilities of the discontinued operation shall be presented separately in the asset and liability sections, respectively, of the statement of financial position. Those assets and liabilities shall not be offset and presented as a single amount. If a discontinued operation is part of a disposal group that includes other assets and liabilities that are not part of the discontinued operation, an entity may present the assets and liabilities of the disposal group separately in the asset and liability sections, respectively, of the statement of financial position. If a discontinued operation is disposed of before meeting the criteria in paragraph 205-20- 45-1E to be classified as held for sale, an entity shall present the assets and liabilities of the discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position for the periods presented in the statement of financial position before the period that includes the disposal. When an entity separately presents in prior periods the assets and liabilities of a discontinued operation, the entity shall not apply the guidance in paragraph 360-10-35-43 as if those assets and liabilities were held for sale in those prior periods. Under ASC 205-20-45-10, in the period in which a component meets the held-for-sale and discontinuedoperations criteria, an entity must present the assets and liabilities of the discontinued operation separately in the asset and liability sections of the balance sheet. Assets and liabilities cannot be offset and presented as a single amount. ASC 205-20-45-10 also requires that an entity reclassify not only the current-period balance sheet but also any comparative balance sheets presented. For example, a discontinued operation that is classified as held for sale and sold in the same reporting period would be presented as held for sale in prior-period balance sheets (but not in the current-period balance sheet). Similarly, the assets and liabilities of a discontinued operation that is abandoned in the current period would be reclassified in the prior-period balance sheet. Under previous guidance, ASC 205-20 neither required nor prohibited the recasting of prior-period balance sheets, which resulted in diversity in practice. ASC 205-20 does not address whether entities should separately present the assets and liabilities of a discontinued operation as current and noncurrent. We believe that it is appropriate to do so and that four balance sheet captions may result from such presentation (e.g., “current assets held for sale,” “noncurrent assets held for sale,” “current liabilities held for sale,” and “noncurrent liabilities held for sale”). In addition, we believe that it is acceptable for an entity to present the assets and liabilities of a discontinued operation classified as held for sale as current in the current-period balance sheet if it is probable that the sale will occur and proceeds will be collected within one year. We think that the current and noncurrent classifications of a discontinued operation’s assets and liabilities should not change in prior periods because the noncurrent assets and liabilities did not meet the criteria for presentation as current in those prior periods.

In the period in which a component meets the criteria for presentation in discontinued operations and its assets and liabilities are collapsed in the balance sheet, the entity must provide detailed information about the assets and liabilities of the discontinued operation. Therefore, the major classes of the discontinued operation’s assets and liabilities must be either (1) presented on the face of the balance sheet in accordance with ASC 205-20-45-11

Such presentation or disclosure must be provided for the discontinued operation in the current period and all prior periods presented. If the major classes of assets and liabilities of a discontinued operation are disclosed in the notes, the disclosure must be reconciled to the amounts presented on the balance sheet, and if the disposal group includes assets or liabilities that are not part of the discontinued operation, the reconciliation should show them separately from the assets and liabilities of the discontinued operation. Entities will need to apply judgment in determining what constitutes “major” with respect to such presentation or disclosure, since ASC 205-20 does not provide guidance on this topic. Under ASC 205-20, in the period in which the discontinued-operations criteria are met, an entity must report the disposal in discontinued operations retrospectively in all periods presented

Illustrative Balance Sheet Presentation of a Discontinued Operation Below is an example of a simplified comparative balance sheet presentation for a component that meets the criteria to be presented as a discontinued operation in the current period. Company A and Subsidiaries Consolidated Balance Sheets As of December 31, 20X8 As of December 31, 20X7 Assets: Current assets: Cash and cash equivalents: $ 65,000 $ 55,000 Receivables, net of allowances of $15,000 as of December 31, 20X8, and $12,000 as of December 31, 20X7 85,000 82,000 Inventories 75,000 70,000 Deferred income taxes 55,000 45,000 Prepaid expenses and other 25,000 25,000 Current assets held for sale * ** 220,000 80,000 Total current assets 525,000 357,000 Property, plant, and equipment, net 650,000 610,000 Deferred income taxes 60,000 55,000 Goodwill 85,000 85,000 Intangible assets, net 75,000 80,000 Other noncurrent assets 80,000 65,000 Noncurrent assets held for sale ** — 148,000 Total assets $ 1,475,000 $ 1,400,000

This information was provided from the documents as i gathered for my research and study.

2) The different inventory methods :

The most commonly used inventory valuation methods under a perpetual system are:

• first-in first-out (FIFO) - it is a method of pricing the issues of msterials in order in which they are purchased.
• last-in first-out (LIFO - The method is based on assumption that the items of last batch purchased are issued first .
• average cost or weighted average cost. - The method gives due weights to quantities purchased and the purchase price while determing the issue price, the average price is calculated by dividing total cost of materials in stock by total quantity of materials prior to each issue.