What should companies disclose regarding discontinued operations under GAAP?

What should companies disclose regarding discontinued operations under GAAP?

• A. Only financial statements related to the past five years
• B. Details about the sale and future plans for the discontinuation
• C. The impact of discontinued operations on cash flows only
• D. Comprehensive details about operations ceasing and results

Answer: (D)

Companies are required to disclose comprehensive details about discontinued operations under GAAP to provide users of financial statements with a clear understanding of how these operations affect the overall financial position and performance. This disclosure includes information on the nature of the discontinuation process, the financial results of the discontinued operations for the reporting period, and any relevant future implications. This requirement ensures transparency and allows stakeholders, such as investors and creditors, to assess the impact of these operations on the company's financial health. Key components of the disclosure typically include the reason for discontinuation, the financial results for the discontinued operations, including gains or losses on disposal, and any cash flows associated with these operations. In contrast, the other options do not fully capture the breadth of information that GAAP mandates. For example, limiting disclosures to financial statements for the past five years or focusing only on cash flow implications does not provide a complete picture of the situation surrounding discontinued operations. Additionally, merely outlining the sale and future plans fails to encompass the critical historical and performance-based information necessary for stakeholders' analysis.

Companies are required to disclose comprehensive details about discontinued operations under GAAP to provide users of financial statements with a clear understanding of how these operations affect the overall financial position and performance. This disclosure includes information on the nature of the discontinuation process, the financial results of the discontinued operations for the reporting period, and any relevant future implications.

This requirement ensures transparency and allows stakeholders, such as investors and creditors, to assess the impact of these operations on the company's financial health. Key components of the disclosure typically include the reason for discontinuation, the financial results for the discontinued operations, including gains or losses on disposal, and any cash flows associated with these operations.

In contrast, the other options do not fully capture the breadth of information that GAAP mandates. For example, limiting disclosures to financial statements for the past five years or focusing only on cash flow implications does not provide a complete picture of the situation surrounding discontinued operations. Additionally, merely outlining the sale and future plans fails to encompass the critical historical and performance-based information necessary for stakeholders' analysis.