ACCA Strategic Business Reporting (SBR) Practice Exam

What is included in the post-tax gain or loss of discontinued operations?

1. Only losses associated with operational costs

2. Remeasurement to fair value less costs to sell

3. The sum of all operational revenues generated

4. Only gains recognized from previous accounting periods

The correct answer is: Remeasurement to fair value less costs to sell

In the context of financial reporting, specifically regarding discontinued operations as defined under IFRS 5, the post-tax gain or loss of discontinued operations includes the remeasurement of assets to fair value less costs to sell. This remeasurement process reflects the fair value that the asset can be sold for, minus any costs that would be incurred to complete the sale. When a component of an entity is classified as discontinued, it is necessary to capture the value based on current market conditions at the point of sale, which is what fair value less costs to sell signifies. This approach ensures that the financial statements accurately reflect the expected economic outcome of discontinuing that operation. The other choices do not accurately encompass the facets of post-tax gains or losses associated with discontinued operations. For instance, merely focusing on operational losses, sum of revenues, or gains from previous periods does not align with the comprehensive financial picture provided by the fair value measurement process. Only the remeasurement process captures the necessary adjustments to the carrying values of assets and liabilities that must be reflected in the gain or loss calculation for discontinued operations.