1. If the discontinued component is sold before the end of the reporting period, elaborate upon the two elements of the reported income effects of a discontinued operation?

By definition, the income or loss stream from a discontinued operation no longer will continue. A financial statement user is more interested in the results of a company's operations that will continue. It is informative, then, for companies to separate the effects of the discontinued operations from the results of operations that will continue. For this reason, the revenues, expenses, gains, losses, and income tax related to a discontinued operation must be removed from continuing operations and reported separately for all years presented.

For example, even though Abbott Laboratories did not sell its generic pharmaceuticals and animal health businesses until 2015, it's important for comparative purposes to separate the effects for any prior years presented. This allows an apples-to-apples comparison of income from continuing operations. So, in its 2015 three-year comparative income statements, the 2014- and 2013-income statements reclassified income from generic pharmaceuticals and animal health businesses to income from discontinued operations. In addition, there was a disclosure note to inform readers that prior years were reclassified.