Which statement best describes the treatment of non-current asset disposals in the arts of financial statements?

The treatment of non-current asset disposals in financial statements is crucial for accurately reflecting a company's financial performance and position. When a non-current asset is disposed of, it can result in either a profit or a loss, depending on the difference between the asset's carrying amount on the balance sheet and the proceeds received from the sale or disposal.

If the proceeds from the disposal exceed the carrying amount, the company recognizes a profit, which positively impacts net income. Conversely, if the proceeds are less than the carrying amount, a loss is recognized, which can decrease net income. This profit or loss from the disposal is then recorded in the income statement, demonstrating how well the company is managing its assets and influencing overall profitability.

By recognizing disposals in this manner, financial statements provide stakeholders, such as investors and creditors, a complete picture of the company’s asset management strategies and their resulting financial implications. This treatment ensures transparency and enhances the credibility of financial reporting, making it essential for users of financial statements to understand the effects of asset disposals on a company's financial health.