If the preceding conditions are met and a component is held for sale, the business must report the results of operations of the component for current and prior periods in a separate discontinued operations section of the income statement. Since Armadillo will have no significant continuing involvement and the resulting cash flows are indirect, the product line should be disclosed as a discontinued operation. Armadillo will have no continuing operational involvement in the product line. Part of the sale agreement stipulates that the buyer will pay Armadillo a 5% royalty on any sales related to the product line for the next three years. (4) Armadillo sells one of its product lines. In this case, it is not appropriate to classify the store as a discontinued operation.

The result will be that the majority of cash flows will continue from the store, despite the change in ownership. (3) Armadillo sells one of its retail stores to a distributor and enters into an agreement to supply goods to the new owner of the store. Since cash flows are associated with this larger group, Armadillo should classify it as a discontinued operation. (2) Upon further consideration, Armadillo decides to list the entire container product group for sale. Since Armadillo does not track cash flows at the individual product level, there is no need to classify operations related to the single product as a discontinued operation. The product is part of a larger product group for which cash flows are tracked. (1) Armadillo Industries plans to cancel one of its pressurized container products, due to a lack of sales. The following are examples of the accounting for discontinued operations:

Mobigo 2 discontinued