Final answer:
Income from discontinued operations is reported on the income statement below continuing operations, showing net income or losses from a business segment that is no longer in operation, which helps to accurately represent a company's ongoing profitability.
Step-by-step explanation:
On the income statement, income from discontinued operations is reported below the income from continuing operations. This figure represents the net income or losses stemming from a segment of the business that the company has decided to discontinue. In accounting, the section for discontinued operations includes any profit or loss from the operation of the discontinued segment up to the discontinuation date and any gain or loss on the sale of the segment's assets.
It is essential to separate income from discontinued operations since these figures are not expected to recur in the future, providing a more accurate picture of the company's ongoing profitability. The treatment of corporate profits after tax and adjustments made for inventory and capital consumption are also crucial to understanding the overall financial health of a company as indicated by the income statement. This approach to reporting allows investors and stakeholders to better assess the company's financial performance.