Recognition and Measurement

For recognizing and measuring the effect of discontinuing operations, this AS does provide any guidelines, but for the purpose the relevant Accounting Standards should be referred.

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 description of the discontinuing operation(s).
  • The business or geographical segment(s) in which it is reported as per AS 17. The date and nature of the initial disclosure event.
  • The date or period in which the discontinuance is expected to be completed if known or determinable.
  • The carrying amounts, as of the balance sheet date, of the total assets to be disposed of and the total liabilities to be settled.
  • The amounts of revenue and expenses in respect of the ordinary activities attributable to the discontinuing operation during the current financial reporting period.
  • 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
  • The amounts of net cash flows attributable to the operating, investing, and financing activities of the discontinuing operation during the current financial reporting period.

Disclosures other than Initial Disclosures Note: All the disclosures above should be presented in the notes to the financial statements except for amounts pertaining to pre-tax profit/loss of the discontinuing operation and the income tax expense thereon (second last bullet above) which should be shown on the face of the statement of profit and loss.

Disclosures as required by AS 4 Contingencies and Events Occurring After the Balance Sheet Date, are made 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.

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:

  • For any gain or loss that is recognised on the disposal of assets or settlement of liabilities attributable to the discontinuing operation,
  • the amount of the pre-tax gain or loss and
  • income tax expense relating to the gain or loss and
  • 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.

In addition to these disclosures, 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. The disclosures 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. If an enterprise abandons or withdraws from a plan that was previously reported as a discontinuing operation, that fact, reasons therefore and its effect should be disclosed. Any disclosures required by this Statement should be presented separately for each discontinuing operation.

The disclosures 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:

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

The amount of the pre-tax gain or loss recognised on the disposal of assets or settlement of liabilities attributable to the discontinuing operation.

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 mentioned above.

Disclosures in an interim financial report in respect of a discontinuing operation should be made in accordance with AS 25, Interim Financial Reporting, including:

  • Any significant activities or events since the end of the most recent annual reporting period relating to a discontinuing operation and
  • Any significant changes in the amount or timing of cash flows relating to the assets to be disposed or liabilities to be sett off.

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