IAS 24

Accounting Standard (AS) 24

(issued 2002)

Discontinuing Operations

Contents

OBJECTIVE

SCOPE Paragraphs 1-2

DEFINITIONS 3-17

Discontinuing Operation 3-14

Initial Disclosure Event 15-17

RECOGNITION AND MEASUREMENT 18-19

PRESENTATION AND DISCLOSURE 20-36

Initial Disclosure 20-22

Other Disclosures 23-25

Updating the Disclosures 26-30

Separate Disclosure for Each Discontinuing Operation 31

Presentation of the Required Disclosures 32

Illustrative Presentation and Disclosures 33

Restatement of Prior Periods 34-35

Disclosure in Interim Financial Reports 36

APPENDICES

Accounting Standard (AS) 24

(issued 2002)

Discontinuing Operations

(This Accounting Standard includes paragraphs set in bold italic type

and plain type, which have equal authority. Paragraphs in bold italic

type indicate the main principles. This Accounting Standard should be

read in the context of its objective and the Preface to the Statements of

Accounting Standards1.)

Accounting Standard (AS) 24, ‘Discontinuing Operations’, issued by the

Council of the Institute of Chartered Accountants of India, comes into effect

in respect of accounting periods commencing on or after 1.4.2004. This

Standard ismandatory in nature2 in respectof accountingperiods commencing

on or after 1-4-20043 for the enterprises which fall in any one or more of the

following categories, at any time during the accounting period:

(i) Enterprises whose equity or debt securities are listed whether in

India or outside India.

1 Attention is specifically drawn to paragraph 4.3 of the Preface, according to which

Accounting Standards are intended to apply only to items which are material.

2 Reference may be made to the section titled ‘Announcements of the Council

regarding status of various documents issued by the Institute of Chartered

Accountants of India’ appearing at the beginning of this Compendium for a

detailed discussion on the implications of the mandatory status of an accounting

standard.

3 It was originally decided to make AS 24 mandatory in respect of accounting

periods commencing on or after 1-4-2004 for the following :

(i) Enterprises whose equity or debt securities are listed on a recognised

stock exchange in India, and enterprises that are in the process of issuing

equity or debt securities that will be listed on a recognised stock

exchange in India as evidenced by the board of directors’ resolution in

this regard.

(ii) All other commercial, industrial and business reporting enterprises,

whose turnover for the accounting period exceeds Rs. 50 crores.

In respect of all other enterprises, it was originally decided to make the Standard

mandatory in respect of accounting periods commencing on or after 1-4-2005.

The relevant announcement was published in ‘The Chartered Accountant’, May

2002, page 1378.

450 AS 24 (issued 2002)

(ii) Enterprises which are in the process of listing their equity or debt

securities as evidenced by the board of directors’ resolution in

this regard.

(iii) Banks including co-operative banks.

(iv) Financial institutions.

(v) Enterprises carrying on insurance business.

(vi) All commercial, industrial and business reporting enterprises,

whose turnover for the immediately preceding accounting period

on the basis of audited financial statements exceeds Rs. 50 crore.

Turnover does not include ‘other income’.

(vii) All commercial, industrial and business reporting enterprises having

borrowings, including public deposits, in excess ofRs. 10 crore at

any time during the accounting period.

(viii) Holding and subsidiary enterprises of any one of the above at any

time during the accounting period.

Earlier application is encouraged.

The enterprises which do not fall in any of the above categories are not

required to apply this Standard.

Where an enterprise has been covered in any one or more of the above

categories and subsequently, ceases to be so covered, the enterprise will not

qualify for exemption from application of this Standard, until the enterprise

ceases to be covered in any of the above categories for two consecutive

years.

Where an enterprise has previously qualified for exemption fromapplication

of this Standard (being not covered by any of the above categories) but no

longer qualifies for exemption in the current accounting period, this Standard

becomes applicable from the current period. However, the corresponding

previous period figures need not be disclosed.

An enterprise, which, pursuant to the above provisions, does not present the

information relating to the discontinuing operations, should disclose the fact.

Discontinuing Operations 451

The following is the text of the Accounting Standard.

Objective

The objective of this Statement is to establish principles for reporting

information about discontinuing operations, thereby enhancing the ability of

users of financial statements to make projections of an enterprise's cash

flows, earnings-generating capacity, and financial position by segregating

information about discontinuingoperations frominformation aboutcontinuing

operations.

Scope

1. This Statement applies to all discontinuing operations of an

enterprise.

2. The requirements related to cash flow statement contained in this

Statement are applicable where an enterprise prepares and presents a cash

flow statement.

Definitions

Discontinuing Operation

3. A discontinuing operation is a component of an enterprise:

(a) that the enterprise, pursuant to a single plan, is:

(i) disposing of substantially 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

(ii) disposing of piecemeal, such as by selling off the

component's assets and settling its liabilities individually;

or

(iii) terminating through abandonment; and

(b) that represents a separate major line of business or

geographical area of operations; and

452 AS 24 (issued 2002)

(c) that can be distinguished operationally and for financial

reporting purposes.

4. Under criterion (a) of the definition (paragraph 3 (a)), a discontinuing

operation may be disposed of in its entirety or piecemeal, but always

pursuant to an overall plan to discontinue the entire component.

5. If an enterprise sells a component substantially in its entirety, the

result can be a net gain or net loss. For such a discontinuance, a binding

sale agreement is entered into on a specific date, although the actual

transfer of possession and control of the discontinuing operation may

occur at a later date. Also, payments to the seller may occur at the time

of the agreement, at the time of the transfer, or over an extended future

period.

6. Instead of disposing of a component substantially in its entirety, an

enterprise may discontinue and dispose of the component by selling its

assets and settling its liabilities piecemeal (individually or in small groups).

For piecemeal disposals, while the overall result may be a net gain or a

net loss, the sale of an individual asset or settlement of an individual

liability may have the opposite effect. Moreover, there is no specific date

at which an overall binding sale agreement is entered into. Rather, the

sales of assets and settlements of liabilities may occur over a period of

months or perhaps even longer. Thus, disposal of a component may be in

progress at the end of a financial reporting period. To qualify as a

discontinuing operation, the disposal must be pursuant to a single coordinated

plan.

7. An enterprise may terminate an operation by abandonment without

substantial sales of assets. An abandoned operation would be a

discontinuing operation if it satisfies the criteria in the definition. However,

changing the scope of an operation or the manner in which it is conducted

is not an abandonment because that operation, although changed, is

continuing.

8. Business enterprises frequently close facilities, abandon products or

even product lines, and change the size of their work force in response to

market forces. While those kinds of terminations generally are not, in

themselves, discontinuing operations as that term is defined in paragraph

3 of this Statement, they can occur in connection with a discontinuing

operation.

Discontinuing Operations 453

9. Examples of activities that do not necessarily satisfy criterion (a) of

paragraph 3, but that might do so in combination with other circumstances,

include:

(a) gradual or evolutionary phasing out of a product line or class of

service;

(b) discontinuing, even if relatively abruptly, several products within

an ongoing line of business;

(c) shifting of some production or marketing activities for a

particular line of business from one location to another; and

(d) closing of a facility to achieve productivity improvements or

other cost savings.

An example in relation to consolidated financial statements is selling a

subsidiary whose activities are similar to those of the parent or other

subsidiaries.

10. A reportable business segment or geographical segment as defined

in Accounting Standard (AS) 17, Segment Reporting, would normally

satisfy criterion (b) of the definition of a discontinuing operation (paragraph

3), that is, it would represent a separate major line of business or

geographical area of operations. A part of such a segment may also

satisfy criterion (b) of the definition. For an enterprise that operates in a

single business or geographical segment and therefore does not report

segment information, a major product or service line may also satisfy the

criteria of the definition.

11. A component can be distinguished operationally and for financial

reporting purposes - criterion (c) of the definition of a discontinuing

operation (paragraph 3) - if all the following conditions are met:

(a) the operating assets and liabilities of the component can be

directly attributed to it;

(b) its revenue can be directly attributed to it;

(c) at least a majority of its operating expenses can be directly

attributed to it.

454 AS 24 (issued 2002)

12. Assets, liabilities, revenue, and expenses are directly attributable to

a component if they would be eliminated when the component is sold,

abandoned or otherwise disposed of. If debt is attributable to a component,

the related interest and other financing costs are similarly attributed to it.

13. Discontinuing operations, as defined in this Statement, are expected

to occur relatively infrequently. All infrequently occurring events do not

necessarily qualify as discontinuing operations. Infrequently occurring

events that do not qualify as discontinuing operations may result in items

of income or expense that require separate disclosure pursuant to

Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior

Period Items and Changes in Accounting Policies, because their size,

nature, or incidence make them relevant to explain the performance of the

enterprise for the period.

14. The fact that a disposal of a component of an enterprise is classified

as a discontinuing operation under this Statement does not, in itself, bring

into question the enterprise's ability to continue as a going concern.

Initial Disclosure Event

15. 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 attributable to the

discontinuing operation; or

(b) the enterprise's board of directors or similar governing body

has both (i) approved a detailed, formal plan for the

discontinuance and (ii) made an announcement of the plan.

16. A detailed, formal plan for the discontinuance normally includes:

(a) identification of the major assets to be disposed of;

(b) the expected method of disposal;

(c) the period expected to be required for completion of the

disposal;

Discontinuing Operations 455

(d) the principal locations affected;

(e) the location, function, and approximate number of employees

who will be compensated for terminating their services; and

(f) the estimated proceeds or salvage to be realised by disposal.

17. An enterprise's board of directors or similar governing body is

considered to have made the announcement of a detailed, formal plan for

discontinuance, if it has announced the main features of the plan to those

affected by it, such as, lenders, stock exchanges, creditors, trade unions,

etc., in a sufficiently specific manner so as to make the enterprise

demonstrably committed to the discontinuance.

Recognition and Measurement

18. An enterprise should apply the principles of recognition and

measurement that are set out in other Accounting Standards for the

purpose of deciding as to when and how to recognise and measure

the changes in assets and liabilities and the revenue, expenses, gains,

losses and cash flows relating to a discontinuing operation.

19. This Statement does not establish any recognition and measurement

principles. Rather, it requires that an enterprise follow recognition and

measurement principles established in other Accounting Standards, e.g.,

Accounting Standard (AS) 4, Contingencies and Events Occurring After

the Balance Sheet Date4 and Accounting Standard on Impairment of

Assets5 .

4 Pursuant to AS 29, Provisions, Contingent Liabilities and Contingent Assets,

becoming mandatory in respect of accounting periods commencing on or after

1.4.2004, all paragraphs of AS 4 that deal with contingencies stand withdrawn

except to the extent they deal with impairment of assets not covered by other

Indian Accounting Standards. Reference may be made to Announcement

XX

under the section titled ‘Announcements of the Council regarding status of

various documents issued by the Institute of Chartered Accountants of India’

appearing at the beginning of this Compendium.

5 Accounting Standard (AS) 28, ‘Impairment of Assets’, specifies the

requirements relating to impairment of assets.

456 AS 24 (issued 2002)

Presentation and Disclosure

Initial Disclosure

20. 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 (as defined in paragraph 15) occurs:

(a) a description of the discontinuing operation(s);

(b) the business or geographical segment(s) in which it is

reported as per AS 17, Segment Reporting;

(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

expense6 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.

21. For the purpose of presentation and disclosures required by this

Statement, the items of assets, liabilities, revenues, expenses, gains,

losses, and cash flows can be attributed to a discontinuing operation only

6 As defined in Accounting Standard (AS) 22, Accounting for Taxes on Income.

Discontinuing Operations 457

if they will be disposed of, settled, reduced, or eliminated when the

discontinuance is completed. To the extent that such items continue after

completion of the discontinuance, they are not allocated to the

discontinuing operation. For example, salary of the continuing staff of

a discontinuing operation.

22. If an initial disclosure event occurs between the balance sheet date

and the date on which the financial statements for that period are

approved by the board of directors in the case of a company or by the

corresponding approving authority in the case of any other enterprise,

disclosures as required by Accounting Standard (AS) 4, Contingencies and

Events Occurring After the Balance Sheet Date, are made.

Other Disclosures

23. When an enterprise disposes of assets or settles liabilities

attributable to a discontinuing operation or enters into binding

agreements for the sale of such assets or the settlement of such

liabilities, it should include, in its financial statements, the following

information when the events occur:

(a) for any gain or loss that is recognised on the disposal of

assets or settlement of liabilities attributable to the

discontinuing operation, (i) the amount of the pre-tax gain

or loss and (ii) income tax expense relating to the gain or

loss; and

(b) the net selling price or range of prices (which is after

deducting expected disposal costs) of those net assets for

which the enterprise has entered into one or more binding

sale agreements, the expected timing of receipt of those

cash flows and the carrying amount of those net assets on

the balance sheet date.

24. The asset disposals, liability settlements, and binding sale agreements

referred to in the preceding paragraph may occur concurrently with the

initial disclosure event, or in the period in which the initial disclosure event

occurs, or in a later period.

25. If some of the assets attributable to a discontinuing operation have

actually been sold or are the subject of one or more binding sale

458 AS 24 (issued 2002)

agreements entered into between the balance sheet date and the date on

which the financial statements are approved by the board of directors in

case of a company or by the corresponding approving authority in the case

of any other enterprise, the disclosures required by Accounting Standard

(AS) 4, Contingencies and Events Occurring After the Balance Sheet

Date, are made.

Updating the Disclosures

26. In addition to the disclosures in paragraphs 20 and 23, an

enterprise should include, in its financial statements, for periods

subsequent to the one in which the initial disclosure event occurs, a

description of any significant changes in the amount or timing of

cash flows relating to the assets to be disposed or liabilities to be

settled and the events causing those changes.

27. Examples of events and activities that would be disclosed include the

nature and terms of binding sale agreements for the assets, a demerger

or spin-off by issuing equity shares of the new company to the enterprise's

shareholders, and legal or regulatory approvals.

28. The disclosures required by paragraphs 20, 23 and 26 should

continue in financial statements for periods up to and including the

period in which the discontinuance is completed. A discontinuance is

completed when the plan is substantially completed or abandoned,

though full payments from the buyer(s) may not yet have been

received.

29. 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.

30. For the purpose of applying paragraph 29, disclosure of the effect

includes reversal of any prior impairment loss7 or provision that was

recognised with respect to the discontinuing operation.

7 Accounting Standard (AS) 28, ‘Impairment of Assets’, specifies the

requirements relating to reversal of impairment loss.

Discontinuing Operations 459

Separate Disclosure for Each Discontinuing Operation

31. Any disclosures required by this Statement should be presented

separately for each discontinuing operation.

Presentation of the Required Disclosures

32. The disclosures required by paragraphs 20, 23, 26, 28, 29 and

31 should be presented in the notes to the financial statements except

the following which should be shown on the face of the statement of

profit and loss:

(a) 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 (paragraph 20 (g)); and

(b) the amount of the pre-tax gain or loss recognised on the

disposal of assets or settlement of liabilities attributable to

the discontinuing operation (paragraph 23 (a)).

Illustrative Presentation and Disclosures

33. Appendix 1 provides examples of the presentation and disclosures

required by this Statement.

Restatement of Prior Periods

34. Comparative information for prior periods that is presented in

financial statements prepared after the initial disclosure event should

be restated to segregate assets, liabilities, revenue, expenses, and

cash flows of continuing and discontinuing operations in a manner

similar to that required by paragraphs 20, 23, 26, 28, 29, 31 and 32.

35. Appendix 2 illustrates application of paragraph 34.

Disclosure in Interim Financial Reports

36. Disclosures in an interim financial report in respect of a

discontinuing operation should be made in accordance with AS 25,

Interim Financial Reporting, including:

460 AS 24 (issued 2002)

(a) any significant activities or events since the end of the most

recent annual reporting period relating to a discontinuing

operation; and

(b) any significant changes in the amount or timing of cash

flows relating to the assets to be disposed or liabilities to be

settled.

Appendix 1

Illustrative Disclosures

Discontinuing Operations 461

This appendix is illustrative only and does not form part of the

Accounting Standard. The purpose of the appendix is to illustrate the

application of the Accounting Standard to assist in clarifying its

meaning.

Facts

• Delta Company has three segments, Food Division, Beverage Division

and Clothing Division.

• Clothing Division, is deemed inconsistent with the long-term strategy

of the Company. Management has decided, therefore, to dispose of

the Clothing Division.

• On 15 November 20X1, the Board of Directors of Delta Company

approved a detailed, formal plan for disposal of Clothing Division, and

an announcement was made. On that date, the carrying amount of the

Clothing Division's net assets was Rs. 90 lakhs (assets of Rs. 105

lakhs minus liabilities of Rs. 15 lakhs).

• The recoverable amount of the assets carried at Rs. 105 lakhs was

estimated to be Rs. 85 lakhs and the Company had concluded that a

pre-tax impairment loss of Rs. 20 lakhs should be recognised.

• At 31 December 20Xl, the carrying amount of the Clothing Division's

net assets was Rs. 70 lakhs (assets of Rs. 85 lakhs minus liabilities

of Rs. 15 lakhs). There was no further impairment of assets between

15 November 20X1 and 31 December 20X1 when the financial

statements were prepared.

• On 30 September 20X2, the carrying amount of the net assets of the

Clothing Division continued to be Rs. 70 lakhs. On that day, Delta

Company signed a legally binding contract to sell the ClothingDivision.

• The sale is expected to be completed by 31 January 20X3. The recoverable

amount of the net assets is Rs. 60 lakhs. Based on that amount, an

additional impairment loss of Rs. 10 lakhs is recognised.

• In addition, prior to 31 January 20X3, the sale contract obliges Delta

Company to terminate employment of certain employees of theClothing

Division,whichwouldresult interminationcostofRs.30lakhs, tobepaid

by 30 June 20X3. A liability and related expense in this regard is also

recognised.

462 AS 24 (issued 2002)

• The Company continued to operate the Clothing Division throughout

20X2.

• At 31 December 20X2, the carrying amount of the Clothing Division's

net assets is Rs. 45 lakhs, consisting of assets of Rs. 80 lakhs minus

liabilities of Rs. 35 lakhs (including provision for expected termination

cost of Rs. 30 lakhs).

• Delta Company prepares its financial statements annually as of 31

December. It does not prepare a cash flow statement.

• Other figures in the following financial statements are assumed to

illustrate the presentation and disclosures required by the Statement.

I. Financial Statements for 20X1

1.1 Statement of Profit and Loss for 20X1

The Statement of Profit and Loss of Delta Company for the year

20X1 can be presented as follows:

(Amount in Rs. lakhs)

20X1 20X0

Turnover 140 150

Operating expenses (92) (105)

Impairment loss (20) (---)

Pre-tax profit from

operating activities 28 45

Interest expense (15) (20)

Profit before tax 13 25

Profit fromcontinuing

operations before tax

(see Note 5) 15 12

Income tax expense (7) (6)

Profit fromcontinuing

operations after tax 8 6

Profit (loss) from

discontinuing operations

before tax (see Note 5) (2) 13

Income tax expense 1(7)

Profit (loss) fromdiscontinuing

operations after tax (1) 6

Profit from operating

activities after tax 7 12

Income tax expense (7) (6)

Profit (loss) from

Discontinuing Operations 463

1.2 Note to Financial Statements for 20X1

The following is Note 5 to Delta Company's financial statements:

On 15 November 20Xl, the Board of Directors announced a plan to dispose

of Company's Clothing Division, which is also a separate segment as per AS

17, Segment Reporting. The disposal is consistent with the Company's longterm

strategy to focus its activities in the areas of food and beverage

manufacture and distribution, and to divest unrelated activities. The

Company is actively seeking a buyer for the Clothing Division and hopes to

complete the sale by the end of 20X2. At 31 December 20Xl, the carrying

amount of the assets of the Clothing Division was Rs. 85 lakhs (previous

year Rs. 120 lakhs) and its liabilities were Rs. 15 lakhs (previous year Rs. 20

lakhs). The following statement shows the revenue and expenses of

continuing and discontinuing operations:

(Amount in Rs. lakhs)

Continuing Discontinuing Total

Operations Operation

(Food and (Clothing

Beverage Division)

Divisions)

20X1 20X0 20X1 20X0 20X1 20X0

Turnover 90 80 50 70 140 150

Operating Expenses (65) (60) (27) (45) (92) (105)

Impairment Loss ---- ---- (20) (---) (20) (---)

Pre-tax profit from

operating activities 25 20 3 25 28 45

Interest expense (10) (8) (5) (12) (15) (20)

Profit (loss) before tax 15 12 (2) 13 13 25

1(7) (6) (13)

operating activities

after tax 8 6 (1) 6 7 12

464 AS 24 (issued 2002)

II. Financial Statements for 20X2

2.1 Statement of Profit and Loss for 20X2

The Statement of Profit and Loss of Delta Company for the year 20X2

can be presented as follows:

(Amount in Rs. lakhs)

20X2 20X1

Turnover 140 140

Operating expenses (90) (92)

Impairment loss (10) (20)

Provision for employee

termination benefits (30) --

Pre-tax profit from

operating activities 10 28

Interest expense (25) (15)

Profit (loss) before tax (15) 13

Profit from continuing

operations before tax

(see Note 5) 20 15

Income tax expense (6) (7)

Profit from continuing

operations after tax 14 8

Loss from discontinuing

operations before tax

(see Note 5) (35) (2)

Income tax expense 10 1

Loss from discontinuing

operations after tax (25) (1)

Profit (loss) from operating

activities after tax (11) 7

Discontinuing Operations 465

2.2 Note to Financial Statements for 20X2

The following is Note 5 to Delta Company's financial statements:

On 15 November 20Xl, the Board of Directors had announced a plan to

dispose of Company's ClothingDivision, which is also a separate segment as

per AS 17, Segment Reporting. The disposal is consistent with the

Company's long-term strategy to focus its activities in the areas of food and

beveragemanufacture and distribution, and to divest unrelated activities.On

30 September 20X2, the Company signed a contract to sell the Clothing

Division to Z Corporation for Rs. 60 lakhs.

Clothing Division's assets are written down by Rs. 10 lakhs (previous year

Rs. 20 lakhs) before income tax saving of Rs. 3 lakhs (previous year Rs. 6

lakhs) to their recoverable amount.

The Company has recognised provision for termination benefits of Rs. 30

lakhs (previous year Rs. nil) before income tax saving of Rs. 9 lakhs

(previous year Rs. nil) to be paid by 30 June 20X3 to certain employees of

the Clothing Division whose jobs will be terminated as a result of the sale.

At 31 December 20X2, the carrying amount of assets of the Clothing

Division was Rs. 80 lakhs (previous year Rs. 85 lakhs) and its liabilitieswere

Rs. 35 lakhs (previous year Rs. 15 lakhs), including the provision for

expected termination cost of Rs. 30 lakhs (previous year Rs. nil). The

process of selling the Clothing Division is likely to be completed by 31

January 20X3.

Interest expense (20) (10) (5) (5)

Profit (loss) before tax 20 15 (35) (2)

Income tax expense (6) (7) 10 1

Profit (loss) from

466 AS 24 (issued 2002)

The following statement shows the revenue and expenses of continuing and

discontinuing operations:

(Amount in Rs. lakhs)

Continuing Discontinuing Total

Operations Operation

(Food and (Clothing

Beverage Division)

Divisions)

20X2 20X1 20X2 20X1 20X2 20X1

Turnover 100 90 40 50 140 140

Operating Expenses (60) (65) (30) (27) (90) (92)

Impairment Loss ---- ---- (10) (20) (10) (20)

Provision for employee

termination ---- ---- (30) ---- (30) ---

Pre-tax profit (loss)

from operating

activities 40 25 (30) 3 10 28

(25) (15)

(15) 13

4(6)

operating activities

after tax 14 8 (25) (1) (11) 7

III. Financial Statements for 20X3

The financial statements for 20X3, would disclose information related to

discontinued operations in a manner similar to that for 20X2 including the

fact of completion of discontinuance.

Discontinuing Operations 467

Appendix 2

Classification of Prior Period Operations

This appendix is illustrative only and does not form part of the

Accounting Standard. The purpose of the appendix is to illustrate the

application of the Accounting Standard to assist in clarifying its

meaning.

Facts

l. Paragraph 34 requires that comparative information for prior periods

that is presented in financial statements prepared after the initial disclosure

event be restated to segregate assets, liabilities, revenue,

expenses, and cash flows of continuing and discontinuing operations in

a manner similar to that required by paragraphs 20, 23, 26, 28, 29, 31

and 32.

2. Consider following facts:

(a) Operations A, B, C, and D were all continuing in years 1 and 2;

(b) Operation D is approved and announced for disposal in year 3 but

actually disposed of in year 4;

(c) Operation B is discontinued in year 4 (approved and announced

for disposal and actually disposed of) and operation E is acquired;

and

(d) Operation F is acquired in year 5.

468 AS 24 (issued 2002)

3. The following table illustrates the classification of continuing and

discontinuing operations in years 3 to 5:

FINANCIAL STATEMENTS FORYEAR 3

(Approved and Published early inYear 4)

Year 2 Comparatives Year 3

Continuing Discontinuing Continuing Discontinuing

A A

B B

C C

D D

FINANCIAL STATEMENTS FORYEAR 4

(Approved and Published early inYear 5)

Year 3 Comparatives Year 4

Continuing Discontinuing Continuing Discontinuing

A A

B B

C C

D D

E

Discontinuing Operations 469

FINANCIAL STATEMENTS FORYEAR 5

(Approved and Published early inYear 6)

Year 4 Comparatives Year 5

Continuing Discontinuing Continuing Discontinuing

A A

B

C C

D

E E

F

4. If, for whatever reason, five-year comparative financial statements

were prepared in year 5, the classification of continuing and

discontinuing operations would be as follows:

FINANCIAL STATEMENTS FORYEAR 5

Year 1

Comparatives

Year 2

Comparatives

Year 3

Comparatives

Year 4

Comparatives

Year 5

Cont. Disc. Cont. Disc. Cont. Disc. Cont. Disc. Cont. Disc.

A A A A A

B B B B

C C C C C

D D D D

E E

F