What distinguishes a discontinued operation from other business activities?

• A. It is conducted wholly in a foreign territory
• B. It represents a strategic shift in a company's operations
• C. It solely affects financial projections
• D. It is fundamentally integral to the ongoing business model

Answer: (B)

A discontinued operation is defined as a component of an entity that has been disposed of or is classified as held for sale, which represents a strategic shift in a company's operations. This shift is significant enough to have a major effect on the entity's operations and financial results. When a company decides to discontinue a particular line of business or a specific geographical operation, it reflects a departure from its previous strategic direction, which can be a crucial factor for stakeholders analyzing the company’s future and financial health.

The classification as a discontinued operation effectively communicates to investors and analysts that the company is moving away from this aspect of its business, which could lead to changes in financial performance and operational focus. Unlike other business activities that may be integral or ongoing, discontinued operations signify a clear decision to exit a particular area, making this option the most accurate in distinguishing it from regular business activities.