Discontinued Operations Question

[jk3nnedy]

Hello,

I hope I am posting in the right forum. My question is in regards to a discontinued operation for a U.S. casino company, PNK.

When looking at revenues, I see that the reported numbers change significantly from year to year. For example, Revenues found in the 2013 10k are the following:

2013 2012 2011
1487.9 1002.2 940.7

and in the 2012 10k:

2012 2011 2010
1197 1141 1058

I am trying to bridge the gap between how the 2011 & 2012 reported revenues have changed so dramatically. In reading footnotes, I found that they have sold a casino in St. Louis and account for it as a discontinued operation and a colleague of mine says they may not account for the revenue they earned in that period from that casino in the same way they did in the past.

But I cannot find any value in the filings that bridges the gap between the year's reported revenue figures.

Does anyone have any insight into why the reported figures are so different? And where they mention that in the 10k? Or if i'm off thinking that its because of discontinued operations?

I would appreciate any help!

 

[bklynboy]

When an operation or unit qualifies for discontinued operations the P&L is segregated between continuing and discontinued operations. There should be note disclosures detailing what they did. This would result in reclassification of revenue (and expenses) to a line called net income from discontinued operations - do you see such a line on the P&L? The notes would then break down what is in here and should identify the revenue that was reclassed.

 

[Counterofbeans]

The issue you are having is that you are comparing numbers from DIFFERENT 10Ks, specifically, you are comparing the 2012 10K to the 2013 10K, instead of examining (primarily) the most recent, 2013 10K. In 2012, the company didn't have disc ops, but they do in 2013.

When dealing with discontinued operations, in the period in which a component of an entity has been disposed of (or is classified as held-for-sale), the result of operations of that component and any gain/loss recognized on disposal is to be reported as a separate component of income (note that this will show after tax).

Simply stated, you take ALL the non-tax results of operations for this component and show everything in a single line item in the income statement. Note that the gain/loss on the disposition of this component is separately disclosed, as are taxes

This is required because you wouldn't want users of the financial statements to think that those specific results of operations are going to continue.

Further, and more importantly for this situation, the income statement results of any prior periods being presented should also be restated to reflect the results of operations of the component of discontinued operations. This is why your comparison between the 2012 and 2013 10Ks looks so strange.

This is required because the comparability of prior year financial statements would fall apart when compared to the most recent period.

As bklyboy states above, there most certainly should be a footnote disclosure describing this transaction. You very well may not see exactly what was reclassed into disc ops, but, without some other disclosure telling you otherwise, you can safely assume that the difference between the 2012 & prior results of operations are simply the results of the reclass into disc. ops.