Evaluating whether the disposal of a component of an entity constitutes a discontinued operation begins with ________.
A)remeasuring the value of net assets held for disposal
B)identifying the cash flows that can be clearly distinguished operationally
C)segregating its operating revenues and expenses from those of continuing operations
D)assessing whether a strategic shift has occurred

Question

Quizplus · Accepted Answer

Evaluating whether the disposal of a component of an entity constitutes a discontinued operation begins with assessing whether a strategic shift has occurred. This means that there is a change in the entity's ongoing plan or strategy for its operations, such as a decision to exit a particular business segment. Once this assessment is made, then the entity can begin to segregate its operating revenues and expenses and remeasure the value of net assets held for disposal. Identifying the cash flows that can be clearly distinguished operationally comes later in the process of evaluating a discontinued operation.

Evaluating Whether the Disposal of a Component of an Entity