Question

Answer the question: True or False

PLEASE HELP ASAP

20. The impact of income taxes on discontinued operations is to reduce gains associated with the discontinuance, but increase the amount of losses.

True or False

Answer 1

TRUE

If there is a loss from discontinued operations, there would be an income tax benefit because losses from discontinued operations are tax deductible and would reduce overall taxes owed, thereby providing a benefit. This process of associating income tax effects with the income statement components that create those effects is referred to as intraperiod tax allocation.

Some authors also argue that, the revenues, expenses, gains, losses, and income tax related to a discontinued operation must be removed from continuing operations and reported separately for all years presented because a financial statement user is more interested in the results of their operations that will continue.