What’s This?
The following events were reported in the financial statements of large, publicly owned corporations:
a. Atlantic Richfield Company (ARCO), previously a separate company that is now owned by BP America, sold or abandoned the entire noncoal minerals segment of its operations. In the year of disposal, this segment had an operating loss. ARCO also incurred a loss of $514 million on disposal of its noncoal minerals segment of the business.
b. American Airlines increased the estimated useful life used in computing depreciation on its aircraft. If the new estimated life had always been in use, the net income reported in prior years would have been substantially higher.
c. Union Carbide Corp. , previously a separate company that is now a wholly owned subsidiary of The Dow Chenical Company, sustained a large loss as a result of the explosion of a chemical plant.
d. Georgia-Pacific Corporation realized a $10 million gain as a result of condemnation proceedings in which a governmental agency purchased assets from the company in a “forced sale.”
Instructions
Indicate whether each event should be classified as a discontinued operation, or an extraordinary item, or included among the revenue and expenses of normal and recurring business operations. Briefly explain your reasons for each answer.
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