How is the subsequent increase in the fair value of a discontinued component accounted for?

When accounting for the subsequent increase in the fair value of a discontinued component, the correct approach is to recognize a gain at fair value minus any costs to sell. This method aligns with the accounting standard's emphasis on reflecting the actual realizable value of the asset when it is sold, after considering any related selling costs.

This recognition is particularly important as the gains associated with the increased fair value can enhance the financial statements by transparently showing the potential for recovery or value not initially accounted for during the discontinuation process. It provides users of the financial statements with relevant information regarding the performance of the discontinued component, ensuring that the financial reporting accurately reflects the assets' value and associated selling costs at the time of re-evaluation.

This approach allows for more realistic portrayals of net assets on the balance sheet as it considers all necessary costs to derive the net gain from the asset's increased value. This means that any subsequent changes in fair value after the discontinuation will be reflected properly, contributing to a true and fair view of the company’s financial condition.