Reporting Sales of Segments Under APB Opinion No. 30

Accounting Principles Board (APB) Opinion 30 defines a segment of a company as a component whose assets, results of operations, and activities can be clearly distinguished operationally and for financial reporting purposes from other components of the entity. A statistical analysis of the ICO-DCO (income from continuing operations-income from discontinued operations) reporting practices of companies that sold business segments revealed that there was a significantly greater proportion of gains on the disposal of components included in ICO and a greater proportion of losses disclosed below the line. A study of annual reports of randomly selected companies that sold business segments revealed that there are various definitions of what constitutes a segment, but the criteria for distinguishing a segment's activities from the rest of the company are varied. The research also revealed the consequences of the ambiguities to the extent that management could rationalize the reporting of a gain or a loss on a sale of a component in ICO or IDO within the framework of APB Opinion 30.