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Accounting
Standard 24 - Discontinuing Operations
AS-22
Accounting for Taxes on Income
| Issuing
Authority: |
The
Institute of Chartered Accountants of India. |
| Nature:
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Recommendatory |
Important
Definitions:
Discontinuing Operation
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
Recogniton 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 setment(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 operationg,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 relationg 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 relationg to the
assets to be disposed or liabilities to be settled and
the events causing those changes.
The above
disclosures should continue for periods upto 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.
Separate
Disclosure for Each Discontinuing Operation
Any
disclosures required by this standard should be presented
separately for each discontinuing operation.
Presentation
of the Required Disclosures
The above 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: operation.
- 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 pre-tax gain or loss recognised on the disposal
of assets or settlement of liabilities attributable
to the discontinuing operation.
Restatement
of Prior Periods
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.
Disclosure
in Interim Financial Reports
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
- b)
any significant changes in the amount or timing of
cash flows relating to the assets to be
disposed or liabilities to be settled.
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