What is considered a discontinued operation?

A discontinued operation refers specifically to a component of an entity that has either been disposed of or classified as held for sale. This classification is important under accounting standards, as it allows users of financial statements to clearly see the impact of discontinuing specific operations on the overall financial health of the business. Recognizing a component as a discontinued operation helps to enhance the relevance and comparability of financial information.

When a component is disposed of, it means it is no longer part of the entity's ongoing business plans, which could encompass segments such as a product line, a subsidiary, or a geographical area. Moreover, if an operation is classified as held for sale, it indicates that the company has committed to selling the component and it is anticipated to be sold rather quickly, aligning with the criteria set out in relevant accounting standards for presenting the financial results.

Other options do not align with the definition of a discontinued operation. For example, a profitable operation from the previous year does not automatically become discontinued; it depends on its current status. Similarly, operations experiencing losses or those under review for closure do not necessarily indicate that these operations have been definitively categorized as discontinued, as they may still be part of the continuing operations of the entity. Hence, the definition provided in the