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Dear Sir,
in the example 1, page 20, chapter four of 2017-18 notes, the income statements of continued and discontinued operations are netted off, so that they are deducted, and the overall result is so that loss of discontinued operation does not affect profit of continued operation.
Whereas in the text book the chapter 17 Reporting financial performance, test your undestanding 2, the result is given as overall result of loss from total operations: loss of discontinued operations of 143 and profit of continued of 3 is netted off as overall loss of 139.
How would be correct to proceed in the exam?
To achieve numerical accuracy would be a good place to start (143 – 3 does not equal 139!)
The results of discontinued operations should be removed from the figures that will then show the results of continuing operations without being affected by the discontinued operation’s figures
Mind you, from what you have written (if I have understood you correctly (I don’t have the text book from which you quote – BPP or Kaplan, it doesn’t matter, I still don’t have either)
it seems that the figures pre-adjustment (so pre the removal of the appropriate discontinued figures) has been correctly adjusted to leave just those figures relating to continuing operations as the main story within the financial statements with the supplementary additional information re the discontinued operations shown separatelyJust thinking about your post for a moment longer, my advice is to remove the figures relating to discontinued operations and show those separately
Does that answer you?
yes it does, but what about the final result? For example a huge of loss of 143 and modest profit of 4 continued operations, as I mentioned an example from Kaplan book, is netted off to present a loss of 139. This is an answer from the text book. But looking at the examples from Open tuition, the profit of continued operation is not affected by loss of discontinued. Is it how should the answer be in the exam?
thanks.
The profits from continuing operations WILL be shown separately. To show a net figure of a loss of 139 within the “regular” statement of profit or loss is disguising the fact that the enormous loss making division (or the division making enormous losses) has now been discontinued
The overall position for the year is that a loss of 139 has been sustained but we need to separate out the results of the discontinuance from the overall figures in order to present more meaningful information to the readers
This is from the IASPLUS website as simplified by me!
“Disclosure in the statement of comprehensive income
The sum of the post-tax profit or loss of the discontinued operation is presented as a single amount on the face of the statement of comprehensive income.
If the entity presents profit or loss in a separate statement, a section identified as relating to discontinued operations is presented in that separate statement.
Detailed disclosure of revenue, expenses, pre-tax profit or loss and related income taxes is required either in the notes or in the statement of comprehensive income in a section distinct from continuing operations.
Such detailed disclosures must cover both the current and all prior periods presented in the financial statements.”
Is that any better for you?
it still does not clarify my question. If we need to separate the profit and loss of discontinued operation, why then example 1 chapter 4 opentuition 17-18 gives an overall result as follows:
years 09 08
640 480
(260) (215)
380 265
(60) (48)
(87) (56)
233 161
(3) (1)
230 160here both profit and losses of continued and discontinued operations are combined and the overall result is shown as if it has absorbed the losses of discontinued operations. Whereas the standard requires to show the results of discontinued operations separately?
What technique is advisable by you?
The printed solution shows exactly what the IFRS requires of us
the published figures EXCLUDE those amounts that relate to the discontinued operation and the result of that discontinued operation are shown as a single one line item within the profit or loss account
I’m totally at a loss to understand why you seem to think that the published final figures include the discontinued amounts (except as they are shown as separate one-line items as they should be)
OK?
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