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AICPA CPA-Financial Exam - Topic 2 Question 127 Discussion
Topic #: 2
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?
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 It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.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.
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