Discontinued Operation

Brief Definition

Discontinued operations refer to parts of a company’s business that have been sold, disposed of, or otherwise terminated.

Further Explanation

Discontinued operations refer to parts of a company’s business that have been sold, disposed of, or otherwise terminated. When a company decides to discontinue a part of its operations, it means that this segment is no longer part of the company’s core activities and will not contribute to its future revenue. Reporting discontinued operations separately from continuing operations in financial statements helps investors and analysts understand the company’s ongoing performance without the influence of parts of the business that are no longer relevant.

Example:
A manufacturing company decides to sell its consumer electronics division to focus solely on its core business of producing industrial machinery. The sale is completed in June, and the company no longer generates revenue from the consumer electronics division after that date. In its financial statements for the year, the company will report the consumer electronics division’s results separately under discontinued operations, showing its revenue, expenses, and any gain or loss from the sale.