Corrpro Companies, Inc., founded in 1984, provides corrosion control–related services, systems, equipment, and materials to the infrastructure, environmental, and energy markets. Corrpro’s products and services comprise (a) corrosion control engineering services, systems, and equipment, (b) coatings services, and (c) pipeline integrity and risk assessment services. The following information was abridged from the company’s March 31, 2011; Form 10-K. Assets and Liabilities Held for Sale In July 2010, the Company’s Board of Directors approved a formal business restructuring plan. The multi-year plan comprises a series of initiatives to perk up operating income and reduce debt. The Company intends to sell non-core business units and employ the proceeds to reduce debt. The Company has engaged outside professionals to help in disposition of the domestic and international non-core business units. Prior to quarter ended September 30, 2010, the Company’s non-core domestic and international units were reported as the Other Operations and International Operations reporting segments. Effective for quarter ended September 30, 2010, the Other Operations and International Operations reporting segments have been eliminated and the non-core domestic and international units are reported as discontinued operations. Prior year financial statements have been reclassified to reflect these non-core units as Discontinued operations, that are also referred to as “assets and liabilities held for sale.”

Consolidated Statements of Operations for the Years Ended March 31,

($ in 000s)                                                                              2011              2010                    2009
Revenues                                                                          $104,220          $123,058               $120,489
Operating costs and expenses
Cost of sales                                                                       71,607              87,326                    85,325
Selling, general, and administrative                                          29,788             32,327                    35,535
Operating income (loss)                                                          2,825               3,405                      (371)
Interest expense                                                                    5,907              5,055                      4,401
Loss from continuing operations
before income taxes                                                               (3,082)           (1,650)                   (4,772)
Provision (benefit) for income taxes                                          (331)            10,669                     (934)
Loss from continuing operations                                             (2,751)          (12,319)                   (3,838)
Discontinued operations
Loss from operations, net of taxes                                          (9,931)         (5,898)                     (4,443)
Gain on disposals, net of taxes                                                2,095                —                            —
Loss before cumulative effect of change in
accounting principle                                                               (10,587)          (18,217)                  (8,281)
Cumulative effect of change in
accounting principle                                                                (18,238)              —                           —
Net loss                                                                               $ (28,825)      $ (18,217)                   $ (8,281)

Required:

problem1. What criteria should be met to warrant reclassifying the non-core business units as discontinued operations effective with quarter ending September 30, 2010?

problem2. Assume that in March 2011 a buyer signed a buy commitment for Corrpro’s Rohrback Cosasco Systems division. This sale needs regulatory approval which is expected to take at least 18 months to get. Should Corrpro’s 2011 financial statements consist of this division in assets and liabilities held for sale? describe.

problem3. Suppose that in the February 2011 a potential buyer of another of domestic noncore business units insisted on a site assessment prior to signing a purchase commitment. The assessment’s purpose was to conclude whether the site was environmentally impaired. Unfortunately for Corrpro, trace amounts of a suspected carcinogen were discovered, causing the buyer to terminate the purchase. The buyer is willing to reconsider its decision if the site is remediated. While the site can be remediated using existing technology, doing so will be costly sufficient to negate the purpose of the sale, which is to increase funds to diminish debt. Management believes that employing new remediation methods currently being tested will make this sale economically feasible and thus places the sale of this business unit on hold. Should Corrpro’s 2011 financial statements comprise this division in Assets and liabilities held for sale?

problem4. Is there any purpose for management to prefer discontinued operations treatment for these noncore business units?