AS 24 establishes principles for reporting information about discontinuing operations — parts of an enterprise that it is in the process of shutting down or disposing of. When an enterprise decides to exit a significant line of business or geographical area, that decision has a major bearing on its future cash flows, earning capacity, and financial position. AS 24 does not change how the assets and liabilities of the operation are measured; instead, it requires separate disclosure of the discontinuing operation so that users can distinguish the continuing business from the part being wound down and better assess the enterprise's prospects.
Objective and scope
The objective is to establish principles for reporting information about discontinuing operations, thereby enhancing the ability of users of financial statements to make projections of an enterprise's cash flows, earning capacity, and financial position by segregating information about discontinuing operations from information about continuing operations. The standard focuses on presentation and disclosure; the recognition and measurement of the items involved are governed by other applicable standards (for example, impairment under AS 28, provisions under AS 29).
What is a discontinuing operation
A discontinuing operation is a component of an enterprise that meets specific criteria. Broadly, it is a component that the enterprise, pursuant to a single plan, is either disposing of substantially in its entirety (for example, by selling the component in a single transaction, by demerger, or by spin-off), or disposing of piecemeal, or terminating through abandonment. Critically, the component must be one that:
Represents a separate major line of business or geographical area of operations; and
Can be distinguished operationally and for financial reporting purposes — that is, its assets, liabilities, revenues, and expenses can be directly attributed to it.
The requirement that the operation be a *separate major line of business or geographical area* means that AS 24 is not triggered by every disposal — closing or selling a minor part of the business, or gradually winding down a product within a continuing line, does not by itself create a discontinuing operation. It must be a significant, distinguishable component being exited under a single plan.
The initial disclosure event
Disclosure begins from the initial disclosure event, which is the earlier of two things: the enterprise entering 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) both approving a detailed, formal plan for the discontinuance and making an announcement of the plan. From the occurrence of the initial disclosure event, the disclosures required by AS 24 apply. The idea is that once the enterprise is genuinely committed to and has announced the discontinuance, users should be told.
Required disclosures
From the initial disclosure event, the enterprise discloses, in respect of the discontinuing operation: a description of the discontinuing operation; the business or geographical segment(s) in which it is reported (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 and total liabilities to be disposed of; the amounts of revenue, expenses, and pre-tax profit or loss from ordinary activities attributable to the discontinuing operation, and the related income tax expense; and the amounts of net cash flows attributable to the operating, investing, and financing activities of the discontinuing operation.
As the discontinuance progresses, the enterprise also discloses any significant changes in the amounts or timing of cash flows relating to the assets and liabilities to be disposed of or settled, and the events causing those changes; and, when it disposes of assets or settles liabilities attributable to the discontinuing operation, the pre-tax gain or loss and the related income tax expense. These disclosures may be presented in the notes, with certain amounts (such as the pre-tax profit or loss from the discontinuing operation) shown on the face of the statement of profit and loss.
Continued presentation
An enterprise continues to present the required disclosures in its financial statements for periods up to and including the period in which the discontinuance is completed. Comparative information for prior periods is restated to segregate the continuing and discontinuing operations, so that users can compare like with like across periods. A discontinuance is completed when the plan is substantially completed or abandoned, though final settlement of some matters may remain.
A brief illustration
A diversified group's board approves and publicly announces a detailed plan to exit its entire textiles division — a separate major line of business whose assets, liabilities, revenues, and expenses can be identified — in order to focus on its core engineering business. That announcement is the initial disclosure event. From that point, the group discloses a description of the textiles division, the segment it belongs to, the date and nature of the announcement, the expected completion timing, the carrying amounts of the division's total assets and liabilities, its revenue, expenses, pre-tax result and tax, and its operating, investing, and financing cash flows. As it later sells the division's assets, it discloses the gains or losses on disposal. Throughout, the continuing engineering business is presented separately from the discontinuing textiles operation, and prior-period comparatives are restated on the same basis — so a reader can see clearly what the ongoing group looks like without textiles.
How AS 24 compares with Ind AS 105
AS 24 corresponds broadly to Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, but there are important differences. The most significant is that Ind AS 105 introduces a measurement dimension that AS 24 does not have: under Ind AS 105, non-current assets (or disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell, are no longer depreciated, and are presented separately in the balance sheet. AS 24, by contrast, is essentially a disclosure standard — it does not prescribe a special "held for sale" measurement basis, leaving measurement to the other standards. The classification criteria also differ: Ind AS 105 has specific "held for sale" criteria (the asset must be available for immediate sale in its present condition and the sale must be highly probable), whereas AS 24 turns on the initial disclosure event (binding sale agreement, or board approval and announcement of a plan). Both aim to separate discontinuing/discontinued operations from continuing ones in the reporting, but Ind AS 105 goes further by changing how the assets are measured and presented.
Common pitfalls
Recurring issues include treating a minor disposal as a discontinuing operation (it must be a separate major line of business or geographical area); failing to begin disclosures from the initial disclosure event; not restating comparative information to segregate continuing and discontinuing operations; and omitting the required cash flow or asset/liability disclosures for the discontinuing operation.
Why this is cleaner on a unified system
Separating a discontinuing operation for disclosure requires being able to attribute assets, liabilities, revenues, expenses, and cash flows to that component reliably — far easier when the enterprise's transactions are captured with sufficient dimensional detail in one connected system. When the ledger and operational data share a single source of truth with consistent tagging of the operation being discontinued, extracting its results, balances, and cash flows for disclosure, and restating comparatives, is more straightforward than assembling the figures from separate tools.
This article is a detailed educational summary of AS 24 in plain language. It is not a substitute for the full text of the standard. Accounting standards are amended from time to time; always verify the current, authoritative text of AS 24 as issued by the ICAI before relying on it, and consult a qualified chartered accountant for application to your specific circumstances.