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A discontinuing operation is a component of an enterprise:

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

  • disposing of substantially in its entirety (example – demerger)
  • disposing of piecemeal (selling and settling assets and liabilities one by one)
  •  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.

Examples of activities that may not satisfy criteria (a) above but that can be discontinuing operations in combination with other circumstances include:

  • gradual or evolutionary phasing out of a product line or class of service;
  • discontinuing, even if relatively abruptly, several products within an ongoing line of business;
  • shifting of some production or marketing activities for a particular line of business from one location to another; and
  • closing of a facility to achieve productivity improvements or other cost savings;
  • Selling shares of subsidiary whose activities are similar to those of the parent or other subsidiaries. (In case of Consolidated Financial Statements)

A reportable business segment or geographical segment as defined in AS-17 would normally satisfy criteria (b) above.

A component that can be distinguished operationally and for financial reporting purposes {criteria [c] above}

  • if all the following conditions are met:

  1.  the operating assets and liabilities of the component can be directly attributed to it;
  2.  its revenue can be directly attributed to it;
  3.  at least a majority of its operating expenses can be directly attributed to it.

Presentation and 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 and up to and including the period in which discontinuance is completed.


1. A description of the discontinuing operation(s);
2. the business or geographical segment(s) in which it is reported as per AS – 17
3. the date and nature of the initial disclosure event;
4. the date or period in which the discontinuance is expected to be completed if known or
5. the carrying amounts, as of the balance sheet date, of the total assets to be disposed
of and the total liabilities to be settled;
6. revenue and expenses from such discontinuing operation in current reporting period;
7. pre-tax profit/loss from discontinuing operation during the current financial reporting
period, and income tax expense.
8. net cash flows attributable to the operating, investing, and financing activities of the
discontinuing operation during the current financial reporting period.

With respect to a discontinuing operation, the initial disclosure event is the occurrence of one of the following, whichever occurs earlier

  • the enterprise has entered into a binding sale agreement for substantially all of the assets of the discontinuing operation; or
  • the enterprise’s board of directors or similar governing body has both
  1. approved a formal plan; and
  2. made an announcement of the plan.

Other Disclosures

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 event occurs.

(a) Gain or loss recognized on such disposal.
(b) Net selling prices (or range of prices) of those assets for whih the enterprise has entered into binding contract, the expected timing of receipt of cash flow and the carrying amount of those assets.

The disclosures required above should be presented in the notes to the financial statements except the following, which should be shown on the face of the statements of profit or loss;

(a) pre-tax profit/loss from ordinary activities of discontinuing operation and related
income tax expense
(b) pre-tax gain or loss recognized on disposal of assets or settlement of liabilities.

If an enterprise abandons or withdraws from a plan that was previously reported as a discontinuing operation, that fact, reason therefor and its effect should be disclosed.

Comparative information for prior periods in respect of discontinuing operations should also be deemed as discontinuing operations.

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