Final answer:
Under IFRS, a component is considered a discontinued operation if it is disposed of or held for sale, represents a separate major line of business or geographical area, signifies a major strategic shift, will not have future cash flows or operations included in the entity, and if the entity will not have significant continuing involvement following the disposal.
Step-by-step explanation:
Under IFRS (International Financial Reporting Standards), a component of an organization may be classified as a discontinued operation if certain conditions are met. These conditions are:
- The component has been disposed of or is classified as held for sale.
- The component represents a separate major line of business or geographical area of operations.
- The disposal represents a strategic shift that has a major effect on the organization's operations and financial results.
- The operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction.
- The entity will not have any significant continuing involvement in the operations of the disposed component after the disposal transaction.
These conditions ensure that the financial statement users are provided with information about operations that are not expected to recur, giving them a clearer view of the entity's ongoing activities and future prospects.