Letter of Recommendation Accounting Sale

Dear Mr. Edwards

I am pleased to advise you on the sale of your ship and the accounting for your cruise business. My recommendation is to report the sale as a discontinued operation. This is recognized when companies try to eliminate components and separate them from their core operations. The framework of generally accepted accounting principles requires special presentation treatment for discontinued operations. The Rialto parts were sorted to be sold entirely to Admiral Cruise Line. The income statement should include all the results of component sales and operations.as well as the gain and loss. Rialto gain and losses should be recognized at the date of sale as income from discontinued operation and a loss on disposal. (FASB, 2017, ASC Para 205-20-45-3) In the Period that a discontinued operation meets all the obligations to be classified as held for sale the assets and liabilities of the discontinued operation should be presented separately in the income statement.

Gains or losses sale of the ship and other net assets

The gains or losses sale of the ship and other net assets is reported as part the income from the continuing operations before income taxes. The gains and losses form part of the income of the Travel Company, but it is reported on the section of non-operating income. What is recognized of Rialto disposal it’s not only the gain and loss from the disposed of components but also the results of the operations, we might have a loss on Rialto components, but under the operations, the income from the sale will be a gain and positive results.

Conditions for Classifying Components as Held for Sale

There are two conditions the components of Rialto ship should be classified for sale, and distinguish them on cash flow. The first condition is the operations, and cash flow of the components should be eliminated from the ongoing operations as disposal transaction. The second condition, after the disposal transaction the company will not have any significant continuing involvement in the operations of the component (FASB, 2016, ASC Para. 205-20-45-1)

While reporting the above operations, it is advisable that the company acts with integrity and objectivity, which is guided by highest sense to serve the interest of shareholders and other stakeholders. Therefore, based on the AICPA codes of ethics, making any reporting decision should be considerate of all stakeholders, uphold the highest sense of honest by following the related Accounting Standards without knowingly misrepresent facts. (AICPA, 2016, ET Section 1.100.001.01)

Please do not hesitate to contact me if more explanations are required.

Sincerely,

Helda Kevork, Partner