OPTION 1: A CODIFICATION EXERCISE ON THE REPORTING OF DISCONTINUED OPERATIONS
Read the following case study:
McNellis, C. J. (2018). Dynamic divestures: A codification exercise on the reporting of discontinued operations. Issues in Accounting Education, 33(1), 53–63.
During the first week of 20X8, Dynamic’s corporate controller, Anne Smith, prepares to initiate the closing activities for 20X7. The closing process at Dynamic is very extensive, as it includes routine activities for consolidating the activities of several subsidiary companies for the creation of the consolidated financial statements. Furthermore, Dynamic’s reporting personnel must also address the unique complications of each acquisition and divesture.
As Ms. Smith awaits the final financial statement numbers prepared by the reporting personnel at each subsidiary, she is anxious to determine the appropriate financial statement presentation of the three subsidiaries discussed above. Most specifically, she is curious as to whether the financial performance of each of the three subsidiaries qualifies for reporting under discontinued operations. Ms. Smith has asked you to review the intricacies of ZD Consulting, Hope Industries, and AM Mining Operations to determine which type of reporting (i.e., continuing operations versus discontinued operations) is appropriate for each subsidiary on Dynamic’s consolidated income statement.
To complete the case requirements, you should perform the following tasks:
- Consider the facts presented for each company within the case.
- Consult the FASB Accounting Standards Codification for guidance on the specific income statement presentation issue to which the controller has requested answers.
- Prepare a memo that clearly addresses the issue, discusses each company’s facts, and provides a clear conclusion regarding the appropriate presentation of each company’s financial information on Dynamic’s consolidated income statement.
In constructing this memo, you should expect to incorporate Accounting Standards Codification references as required to support your conclusions.
Include any basic calculations used in your analysis from the data provided as part of your submission.
- Write a paper (memo) of a minimum of six double-spaced pages, not counting the title and reference pages (which you must include).
- Copy and paste each one of the questions into your paper in bold type to ensure you have answered each of the assignment requirements.
- Use terms, evidence, and concepts from class readings, including professional business language.