ExpertEasy1 markMultiple Choice
CPA · Question 50 · Area I: Financial Reporting
Which of the following describes the 'Component of the Entity' concept for Discontinued Operations?
Which of the following describes the 'Component of the Entity' concept for Discontinued Operations?
Answer options:
A.
A portion of the entity (operations and cash flows) that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.
B.
Any asset group that is held for sale.
C.
A separate legal subsidiary only.
D.
A segment that has been sold.
How to approach this question
Recall definition. Component = Clearly distinguishable operations and cash flows. To be Discontinued Op, must also represent a Strategic Shift.
Full Answer
A.A portion of the entity (operations and cash flows) that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.✓ Correct
A
A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. (ASC 205-20).
Common mistakes
Thinking it must be a subsidiary.
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