As 24

Accounting Standard 24
ACCOUNTING STANDARD 24
DISCONTINUING OPERATIONS
1. Scope:
This Statement applies to all discontinuing operations of an enterprise.
2. Discontinuing Operation:
A discontinuing operation is a component of an enterprise:
• that the enterprise is disposing, pursuant to a single plan and
• that represents a separate major line of business or geographical
area of operations; and
• that can be distinguished operationally and for financial reporting
purposes.
A component of an enterprise can be disposed in any of the following
mode:
(a) disposing of component in its entirety, such as
✓ by selling the component in a single transaction or
✓ by demerger or spin-off of ownership of the component to
the enterprise’s shareholders; or
(b) disposing of component in piecemeal, such as by selling off the
component’s assets and settling its liabilities individually; or
(c) terminating through abandonment.
Following are not discontinuing operation
(a) gradual phasing out of a product line or class of service;
(b) discontinuing several products within an ongoing line of business;
(c) shifting of some production or marketing activities from one
location to another; and
(d) closing of a production facility to achieve productivity,
improvements or other cost savings.
(e) selling a subsidiary
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A component can be distinguished operationally and for financial

reporting purposes if all the following conditions are met:
• the operating assets and liabilities of the component can be
directly attributed to it;
• its revenue can be directly attributed to it;
• at least a majority of its operating expenses can be directly
attributed to it.
3. Initial Disclosure Event :

With respect to a discontinuing operation, the initial disclosure event is the
occurrence of one of the following, whichever occurs earlier :
(a) the enterprise has entered into a binding sale agreement for
substantially all of the assets of the discontinuing operation; or
(b) the enterprise’s board of directors or similar governing body has both
• approved a detailed, formal plan for the discontinuance and
• made an announcement of the plan.
A detailed, formal plan for the discontinuance normally includes:

• identification of the major assets to be disposed of;
• the expected method of disposal;
• the period expected to be required for completion of the disposal;
• the principal locations affected;
• the estimated proceeds to be realised by disposal.
• number of employees to be retrenched along with retrenchment
compensation.
Announcement means giving information in a sufficiently specific

manner so as to make the enterprise committed to the discontinuance.
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4. Presentation and Disclosure

Initial Disclosure: An enterprise should include the following information
relating to a discontinuing operation in its financial statements beginning
with the financial statements for the period in which the initial disclosure
event occurs:
(a) a description of the discontinuing operation(s);
(b) the business or geographical segment in which it is reported as per AS 17
(c) the date and nature of the initial disclosure event;
(d) the date or period in which the discontinuance is expected to be
completed if known or determinable;
(e) the carrying amounts, as of the balance sheet date, of the total assets
to be disposed of and the total liabilities to be settled;
(f) the amounts of revenue and expenses in respect of the ordinary
activities attributable to the discontinuing operation during the
current financial reporting period;
(g) the amount of pre-tax profit or loss from ordinary activities
attributable to the discontinuing operation during the current financial
reporting period, and the income tax expense related thereto; and
(h) the amounts of net cash flows attributable to the operating, investing,
and financing activities of the discontinuing operation during the
current financial reporting period.
Other Disclosures: When an enterprise disposes of assets or settles liabilities

attributable to a discontinuing operation, it should disclose the following
information when the events occur:
(a) Amount of gain or loss that is recognised on the disposal of assets or
settlement of liabilities attributable to the discontinuing operation
(b) income tax expense relating to the gain or loss; and
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Updating the Disclosures:

• The disclosures required should continue in financial statements for
periods up to and including the period in which the discontinuance is
completed.
• If an enterprise abandons or withdraws from a plan that was previously
reported as a discontinuing operation, that fact, reasons therefor and
its effect should be disclosed.
Separate Disclosure for Each Discontinuing Operation:

Any disclosures required by this Statement should be presented separately
for each discontinuing operation.
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Accounting Standard 24

A component can be distinguished operationally and for financial

3. Initial Disclosure Event :

A detailed, formal plan for the discontinuance normally includes:

Announcement means giving information in a sufficiently specific

4. Presentation and Disclosure

Other Disclosures: When an enterprise disposes of assets or settles liabilities

Updating the Disclosures:

Separate Disclosure for Each Discontinuing Operation:

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