Ms. Amelia Emerson, CPA
Ski High, Inc.
124 Main Street
Los Angeles, CA 91022
Dear Ms. Emerson:
Thank you for the opportunity to work with you. I have researched the codification to advice you on how to report the sale of the ski resorts. I recommend that the gains from the sale of the ski resorts should be recorded as income from discontinued operations. Dealing with the ethical issue, any financial information should be presented to the public with integrity and objectivity.
The gain on the sale of the ski resorts should be recorded as a discontinued operation. The reason why Ski High Inc. has sold three of its ski resorts is because it has been experiencing an unfavorable amount of warm weather during skin season in the last two years. However, since Ski High Inc. is a multi-divisional company, selling its resort division will not effect the operations of the other divisions. Ski High Inc. can still manufacture and distribute its products. An event of this nature is considered a discontinued event since the operation of the ski resorts have been eliminated and the company will not have any more involvement in operating any ski resorts (FASB, 2011, ASC para. 205-20-45-1).
The gain on the sale of the ski resorts should not be considered an extraordinary gain. The only way this event would be an extraordinary event is if the event was unusual in nature and infrequent (FASB, 2011, ASC para. 225-20-45-2). Having warm weather is neither unusual nor infrequent since no one can control the weather conditions.
In dealing with the ethical issue, a professional member should handle it with integrity and objectivity as any CPA is required to do under the Rule 102 of AICPA Code of Professional Conduct. Leaving all conflicts of interest aside when dealing with the preparation of financial statements will help you avoid misrepresentation of any entries that might lead to future legal problems.
For any further questions and...