Correction
A disposal is a discontinued operation only when all three conditions are met: the activity is a distinguishable component, it has been disposed of or meets the applicable held-for-sale criteria, and its disposal represents a strategic shift with a major effect on the entity's operations and financial results.
Why the mistake can seem reasonable
A sale, closure, or abandonment ends an activity, so the word discontinued may appear to fit. In US GAAP, however, discontinued operation names a narrow presentation category. The ordinary meaning does not supply the accounting test.
Apply the correction
Closing one of many similar locations may leave the business strategy largely unchanged. Selling an entire major product line may change both what the entity does and its financial results. Apply the component, disposal-status, and strategic-shift conditions before choosing the income-statement section.
If a disposal does not qualify, its recognized results do not disappear. Report them in continuing operations and apply any separate measurement and disclosure requirements.
When this mistake may appear
- Management calls a disposal strategic.
- A business activity will not recur after year end.
Your work may contain this mistake if:
- Moves every disposal below continuing operations.
- Skips component boundaries and major-effect evidence.
- Ignores held-for-sale criteria, continuing involvement, tax effects, comparatives, and disposal disclosures.