Which of the following best describes the purpose of reporting discontinued operations?

• A. To gather data for future business ventures
• B. To provide users with relevant information about operational focus changes
• C. To solely comply with regulatory requirements
• D. To determine potential tax liabilities

Answer: (B)

The purpose of reporting discontinued operations is to provide users with relevant information about changes in a company's operational focus. When a company decides to discontinue a part of its business, it is important for stakeholders—like investors, creditors, and analysts—to understand how this decision impacts the overall financial position and performance of the company. Such reporting allows users to see the results of continuing operations clearly, separate from those of the discontinued segment, which in turn helps them make informed decisions based on the current operational strategy and future profitability potential of the remaining segments.

Disclosed information about discontinued operations can lead to a better understanding of the company's ongoing business strategy and its resource allocation, enabling users to gauge the sustainability and growth prospects of the continuing operations accurately. By doing so, it provides transparency regarding the performance and risks associated with discontinuing parts of the business.

Other options, while they may touch on relevant aspects of business operation and compliance, do not fully capture the integral role of discontinued operations reporting in offering clarity on a company’s evolving business focus.