3.2 Acct Unusual Items

What qualifies as a discontinued operation?

A strategic disposal of a major line of business, geographical area, or equity investment that can be clearly distinguished for operations and reporting purposes.

How are the results of discontinued operations reported?

Separately, after income from continuing operations, and presented net of tax.

In which section of the income statement should discontinued operations appear?

Below Income from Continuing Operations, with results net of tax, before arriving at Net Income.

What per-share information must accompany discontinued operations?

Companies must present earnings per share (EPS) for both continuing operations and discontinued operations on the face of the income statement (or in notes).

What is intraperiod tax allocation?

Allocating the income tax expense to separate components of the income statement — i.e., continuing operations and discontinued operations.

Why is intraperiod tax allocation important?

It helps users understand how much tax is related to ongoing versus discontinued operations, enhancing clarity about one-time impacts and aiding future cash flow forecasting.

How is a gain on discontinued operations handled with taxes?

The gain is shown net of its specific tax effect; the tax “follows the income”.

How is a loss on discontinued operations shown with taxes?

The loss is reduced by the related tax savings, and the tax benefit is reflected in the net loss.

hat is Other Comprehensive Income (OCI)?

OCI includes gains/losses not recognized in net income but affecting equity — such as unrealized gains/losses on available-for-sale securities.

Why are these items excluded from net income?

To avoid volatility from fluctuations in fair values that may not be realized and could mislead users.

How is comprehensive income reported?

Either via:

• One-statement approach: Net Income followed immediately by OCI and total Comprehensive Income; or

• Two-statement approach: Separate Income Statement and Statement of Comprehensive Income, ending with Comprehensive Income.

Where does OCI accumulate?

In equity under Accumulated Other Comprehensive Income (AOCI) on the balance sheet.

Are companies required to show EPS for OCI?

No — EPS disclosures are limited to net income components, not OCI.