Discontinuing operation is a component of an enterprise:
- that the enterprise, pursuant to a single plan, is:
- disposing 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
- disposing of piecemeal, such as by selling off the component's assets and settling its liabilities individually; or
- terminating through abandonment; 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.
Initial Disclosure event
- the enterprise has entered into a binding sale agreement for substantially all of the assets
attributable to the discontinuing operation; or
- 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.
- terminating through abandonment; 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.
Recognition and Measurement
Recognition and measurement principles established in other accounting standards should be followed in the accounting of changes in assets, liabilities, revenue, expenses, losses, and cash flow relating to a discontinuing operation.
Presentation and Disclosure
Initial Disclosure The following information should be included in the 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-Segment Reporting;
- 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 form 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 operation, investing and financing activities of the discontinuing operation during the current financial reporting period.
If an initial disclosure event occurs between the balance sheet date and the date of approval of accounts, disclosures as required by AS 4 - Contingencies and Events Occurring after the Balance Sheet Date, are made.
Other Disclosures The following information pertaining to asset disposals, liability settlements, and binding sale agreements pertaining to a discontinuing operation should be included in the financial statements when the events occur:
- for any gain or loss recognised on asset disposal or liability settlement attributable to the
discontinuing operation,
- the amount of the pre-tax gain or loss and
- income tax expense relation 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.
Updating the Disclosures
The financial statements for periods subsequent to the one in which the initial disclosure event occurs should include a description of any significant changes in the amount or timing of cash flows relation to the assets to be disposed or liabilities to be settled and the events causing those changes.
The above disclosures should continue for periods up to and including the period in which the discontinuance is completed (though full payments from the buyer(s) may not yet have been received).
The fact, reasons and effect of an abandoned or withdrawn plan previously reported as a discontinuing operation should be disclosed.
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