What constitutes a discontinued operation?

A discontinued operation specifically refers to a component of a business that has been disposed of or is classified as held for sale. This classification is important for financial reporting as it distinguishes the impacts of those operations from ongoing ones, allowing stakeholders to assess the continuing profitability and performance of the remaining business activities.

In financial statements, discontinued operations are shown separately to highlight the impact of these activities on the overall financial position and performance of the entity. This helps users of the financial statements to better understand the ongoing operations of the entity and to make more informed decisions based on current performance.

The other options do not accurately describe what constitutes a discontinued operation. A temporary component still in operation does not meet the criteria for discontinuation; it implies that the component is still functional and part of the ongoing operations. A part of an entity that remains unchanged clearly indicates continuity rather than cessation of activity. A projection of future operations pertains to forecasts rather than actual components that are being disposed of or held for sale.