We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What are Discontinued Operations?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 15,488
Share

Discontinued operations involve any production function of a company that is either in the process of being phased out or has already ceased to take place. This can include production facilities that have been shut down and are currently offered for sale. Discontinued operations are accounted for differently from continuing operations in the accounting records of the company.

A business may choose to terminate the operations of a facility or a division of the company due to a number of factors. The products produced at a given facility may become obsolete or lose their appeal to the buying public. If the equipment at the facility cannot be adapted to manufacture other products that still represent a saleable product, the decision may be made to close the facility and sell off the assets related to the operation before any more loss takes place.

At other times, operations at particular facilities may be discontinued due to geographic issues. This is especially true when transportation costs between facilities begin to erode the profitability of maintaining a relatively remote plant or storage facility. In this scenario, the company may choose to outsource the production to another company that is in closer proximity and shut down the remote facility.

While discontinued operations may include a decision to stop producing certain products, simply making a change in a product line does not constitute a true status of discontinuance to an operation. If the facilities used to product the discontinued product are adapted to manufacture a different product, the operation is classified as continuing and is not treated as an asset that is to be sold. The key to classification as discontinued operations rests in whether the asset is of no more value to the company and should be sold to avoid or minimize loss. If the operation can be adapted or salvaged in any manner and allowed to continue functioning, the operation remains classified as continuing.

It is rare that a company will retain ownership of discontinued operations for an extended period of time. Usually, the facility along with any equipment and other assets connected with the operation, are disposed of as soon as possible. This allows the company to avoid paying any additional taxes on property and assets that are no longer productive.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-are-discontinued-operations.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.