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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... bstantially 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 (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 di .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... (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. 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 .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... the changes in assets and liabilities and the revenue, expenses, gains, losses and cash flows relating to a discontinuing operation. 19. This Standard 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 Date33 and Accounting Standard (AS) 28, Impairment of Assets. 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 di .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... sposals, 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 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 .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... cation 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: (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. Illustration 1 Illustrative Disclosures This illustration does not form part of the Accounting Standard. Its purpose 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 lakhs minus liabilities of Rs .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... from discontinuing operations after tax (1) 6 Profit from operating activities after tax 7 12 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 long-term 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 Operations (Food and Beverage Divisions) Discontinuing Operation (Clothing Division) Total 20X1 20X0 20X1 20X0 20X1 20X0 Turnover 90 80 50 70 140 150 Operating Expenses (65) (60) (27) .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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..... 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. The following statement shows the revenue and expenses of continuing and discontinuing operations: Continuing Operations (Food and Beverage Division) Discontinuing Operation (Clothing Divisions) Total 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 Interest expense (20) (10) (5) (5) (25) (15) Profit (loss) before tax 20 15 (35) (2) (15) 13 Income tax expense (6) (7) 10 1 4 (6) Profit (loss) from operating activities after tax 14 8 (25) (1) (11) 7 3. 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. Illustration 2 Classification of Prior Period Operations This illustration does not form part of the Accounting Standard. Its purpose is to i .....

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AS - 24 - Discontinuing Operations - Companies (Accounting Standards) Rules, 2021

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