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AICPA CPA-Financial Exam - Topic 2 Question 127 Discussion

Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy's operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation?
A) When Envoy classifies it as held for sale.
B) When Envoy receives an offer for the segment.
C) When Envoy first sells any of the assets of the segment.
D) When Envoy sells the majority of the assets of the segment.

AICPA CPA-Financial Exam - Topic 2 Question 127 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 127
Topic #: 2
[All CPA-Financial Questions]

Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy's operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation?

Show Suggested Answer Hide Answer
Suggested Answer: A

Choice 'a' is correct. The earliest period that a component of an entity can be reported in discontinued operations is when the component meets the following 'held for sale' criteria:

1. Management commits to a plan to sell the component.

2. The component is available for immediate sale in its present condition.

3. An active program to locate a buyer has been initiated.

4. The sale of the component is probable and the sale is expected to be completed within one year.

5. The sale of the component is being actively marketed.

6. It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.

Choices 'b', 'c', and 'd' are incorrect, per the Explanation: above.


by Clement at May 27, 2026, 01:07 PM

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Lavonda
I lean towards D because it seems like they need to sell most of the assets to really consider it discontinued, but I’m not completely confident.
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Karrie
5 days ago
I feel like it could be C, but then again, I recall something about needing to complete the sale of the majority of assets to report it properly.
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Nan
10 days ago
I'm not entirely sure, but I remember a practice question where we discussed the criteria for discontinued operations. It might be B, but I could be mixing it up.
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Herman
15 days ago
I think the answer might be A, since it seems like that's when they would officially recognize it as held for sale.
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