CFA Practice Question

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CFA Practice Question

When a company sells a major portion of its business, it reports the operating results of the discontinued portion of the business on the income statement under ______.

A. extraordinary items
B. cumulative effect of a change in accounting principle
C. discontinued operations
Correct Answer: C

A company reports the operating results of a discontinued segment of its business under discontinued operations. The company also shows any gain or loss on the disposal of the discontinued segment separately under discontinued operations.

User Contributed Comments 5

User Comment
katybo if the portion is independent, right?
sarath If the portion is separate both physically and operationally then it will be considered discounted operations and it will be reported under the discounted operations....
Rotigga The key is that if a firm divests a Portion of a segment, then it is an Unusual or Infrequent Item, but if sheds a complete segment, then it goes under Discontinued Operations.
ridone to my understanding if the word "major" were removed from the question the correct answer would be B?
ddrmax @ridone. if 'major' is removed, it will be reported as a usual/infrequent item
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