How to decide if the gain or loss is part of continuing operations or it is non-operating?
Under U.S. GAAP, the financial statements classify income between income from continuing operations and non-operating income. There is a level of subjectivity that is involved in determining whether the gain or loss should be considered part of continuing operations or it should be part of non-operating.
The visual below provides some key phrases or buzzwords to look for in a question or that can be used to assess what the proper classification should be.
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How to decide whether a gain or loss is recorded to income from operations or non-operating income?
The classification is really quite subjective and is ultimately up to the company. When a company experiences an event and is deciding whether or not its normal operations or non-operating, they should assess the likelihood of the event occurring. Has it happened in the past? Will it happen again in the next few years? For […]