Which statement describes discontinued operation accounting?

• A. Recognized as a separate entity on the balance sheet.
• B. Included with continuing operations in the income statement.
• C. Reported separately from continuing operations, net of tax, as a single line item or section.
• D. Only disclosed in the notes and not in the main statements.

Answer: (C)

When a component is disposed of or is held for sale, its results are shown separately from the ongoing business. The income statement presents the discontinued operation’s results net of tax as a single line item or in a dedicated section, making it easy to see the impact of the disposal on period earnings without mixing it with continuing operations. The carryover assets and liabilities of that disposal group appear on the balance sheet as held for sale, but the crucial income statement treatment is the separate, net-of-tax presentation. This clarity helps users evaluate ongoing performance independent of the disposed segment.