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.
| Scope | Disclosure of discontinuing operations |
| Discontinuing operation | A distinguishable component being disposed of/terminated |
| Initial disclosure event | Binding sale agreement or approved detailed plan |
| Discloses | Carrying amounts, results, cash flows of the component |
| Corresponding standard | AS 24 (Ind AS 105 for Ind AS filers) |
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 full worked example
AS 24 is a disclosure standard — it governs how a company reveals that it is winding down or selling a distinguishable component, so users can separate the continuing business from the part that is going away. The worked example is the disclosure framework and its trigger.
| Element | Requirement |
|---|---|
| What qualifies | A component that is distinguishable operationally and for reporting, being disposed of or terminated |
| Trigger (initial disclosure event) | The earlier of a binding sale agreement or the board approving a detailed formal plan |
| What is disclosed | The business/geographical segment, the timing, the carrying amounts of assets and liabilities, and the pre-tax results and cash flows attributable to it |
An illustrative disclosure. Suppose a company approves a plan to discontinue a division. AS 24 requires the results of that division to be shown separately from continuing operations:
| Division being discontinued | Amount (₹) |
|---|---|
| Revenue | 80,00,000 |
| Pre-tax result | (6,00,000) |
| Carrying amount of assets | 45,00,000 |
| Carrying amount of liabilities | 18,00,000 |
The purpose is predictive: users assessing a company's future prospects need to know which results come from operations that will continue and which come from a component that is being wound down, because only the former is a guide to future performance. AS 24 focuses on disclosure and does not itself change measurement. For Ind AS filers, the equivalent ground is covered by Ind AS 105, which additionally deals with measurement of assets held for sale.
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.
Frequently asked questions
What is a discontinuing operation under AS 24?
A discontinuing operation is a relatively large, distinguishable component of an enterprise, operationally and for financial reporting, that the enterprise is disposing of substantially in its entirety or terminating through abandonment, under a single plan.
What triggers disclosure under AS 24?
The initial disclosure event is the earlier of the enterprise entering into a binding sale agreement for substantially all the assets of the discontinuing operation, or the board of directors approving and announcing a detailed formal plan for the discontinuance.
What must be disclosed about a discontinuing operation under AS 24?
AS 24 requires disclosure of the business or geographical segment involved, the timing, the carrying amounts of the assets and liabilities to be disposed of, and the revenue, expenses, pre-tax result and cash flows attributable to the discontinuing operation.
What is the difference between AS 24 and Ind AS 105?
AS 24 is primarily a disclosure standard for discontinuing operations. Ind AS 105 covers similar ground for discontinued operations but additionally addresses measurement, requiring non-current assets held for sale to be measured at the lower of carrying amount and fair value less costs to sell.