In Reporting for Discontinued Operations, Typically the Date on Which

Essay

In reporting for discontinued operations, typically the date on which the disposal of the segment occurs follows the date the decision is made to dispose of the segment. In addition, the disposal may occur in the period (year 2) following the year the decision is made (year 1).
Under these circumstances, there are three situations, which can give rise to a reported overall gain on discontinued operations. The situations depend on earnings during the phase-out period (in both years), and on the difference between the selling price and book value of segment net assets.
Required: For each of the three situations, discuss: (1) the variables defining each situation, (2) the reporting of the gain in year 1, and (3) the rationale for that reporting.