CFA Level I · CFA Level I Exam · Analyzing Income Statements
Under IFRS, an entity disposes of a component that represents a separate major line of business and meets the criteria for a discontinued operation. The results of that component are most likely presented:
The results of a discontinued operation are shown as one after-tax amount, separate from continuing operations. IFRS 5 requires this separate presentation so analysts can assess continuing performance. Extraordinary item treatment is prohibited under IFRS, and the results are not merged into operating expenses.
- AAs a single amount after tax, separate from continuing operationsCorrect
- BWithin operating expenses, with a footnote disclosure
- CAs an extraordinary item below net income
Explanation
IFRS 5 requires a single amount on the face of the income statement comprising the post-tax profit or loss of the discontinued operation and any post-tax gain or loss on its disposal. Extraordinary items are prohibited under IFRS, and the results are not blended into operating expenses.
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