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collapse. As a result of this analysis, petitioner’s management
concluded that the option most likely to minimize petitioner’s
losses with respect to G�nther was to prevent G�nther’s
bankruptcy and any default on G�nther’s bank loans while
petitioner paid down the guaranteed bank loans and attempted to
find a purchaser for G�nther.
Once petitioner’s management concluded that G�nther was no
longer a viable going concern, that G�nther must be sold or
otherwise disposed of, and that its disposal would generate a
loss, it presented its plan to petitioner’s board of directors.
On September 3, 1992, petitioner’s board of directors approved
the plan to dispose of G�nther, and petitioner adopted
discontinued operations treatment with respect to G�nther’s
operations in preparing petitioner’s consolidated financial
statements as of May 31, 1992.
E. Discontinued Operations Treatment
Petitioner has prepared its consolidated financial statement
in accordance with U.S. Generally Accepted Accounting Principles
(U.S. GAAP) since 1981. U.S. GAAP requires a company to treat a
business segment or unit as a discontinued operation when the
company makes a decision to dispose of the business segment or
unit and management expects to incur a loss on the disposal.
When a company adopts discontinued operations treatment with
respect to a business unit, U.S. GAAP requires management to
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