The divesting firm is required to recognize a gain or loss for financial reporting purposes equal to the difference between the fair value of the consideration received for the divested operation and its market value.

Question

Quizplus · Accepted Answer

The gain or loss for financial reporting purposes is recognized as the difference between the fair value of the consideration received and the carrying amount (book value) of the divested operation's net assets, not its market value.

The Divesting Firm Is Required to Recognize a Gain or Loss