Question

Discuss the appropriate treatment in the income statement for the following items:

(a) Loss on discontinued operations.

(b) Non-controlling interest allocation.

Short answer

1. The loss on discontinued operations is deducted from the income from continuing operations.
2. Non-controlling interest allocation is represented separately in the income statement.

Step-by-step solution

Definition of Income Statement

An income statement is a tabular presentation of the business entities’ expenses and revenues data that facilitates the management to compute the net income or net loss earned or incurred during one accounting period.

Treatment of loss on discontinued operations

The loss on discontinued operations is deducted from the income from continuing operations in an income statement. Also, the same deduction should benet of tax, or the company should subtract the applicable taxes from such losses to obtain accurate net income.

Treatment of non-controlling interest allocation

Non –controlling interest allocation represents the ownership position of the shareholders who own less than 50% of shares outstanding and do not allow to participate in the decision-making process.

The non-controlling interest is reported separately in the income statement asa profit’s share that belongs to the minority shareholders.