As 24 - Discontinuing Operations

8/12/2019 As 24 - Discontinuing Operations

1/11


2/11

Disposing of substantially in its entirety in a single transaction or bydemerger or spin-off of ownership

Terminating through abandonment

That represents a separate major line of business or geographical area ofoperations;

Disposing of piecemeal, selling assets & settling its liabilities individually

A component that the enterprise, pursuant to a single plan, is

That can be distinguished operationally and for financial reporting purposes.


3/11

BODs has approved a detailed, formal plan & made an announcement of it

Identification of the major assets to be disposed of

Entered into a binding sale agreement for substantially all of the assets

The period expected to be required for completion of the disposal

The principal locations affected

The location, function, & number of employees who will be compensated

The expected method of disposal

The estimated proceeds or salvage to be realised by disposal


4/11

Expense due to operating activities that is directly attributable to the segment

Expense that can be allocated on a reasonable basis to the segment

Aggregate of

Extraordinary items, Interest expense & income tax expense

Excludes

Losses on sales of investments or losses on extinguishment of debt

General administrative expenses, head-office expenses, and other expensesthat arise at the enterprise level and relate to the enterprise as a whole.

If interest is included as a part of the cost of inventories such interest isconsidered as a segment expense.


5/11

Internal financial reporting system as the starting point for identifying

items that can be directly attributed to segments.

The organisational & internal reporting structure of whether its dominantsource of geographical risks will normally provide evidence

The risks and returns are influenced both by the geographical location

of its operations and also by the location of its customers

Allocation to segments would not be based on Internal financialreporting system but pursuant to their respective definitions

If a particular item of depreciation or amortisation is included

in segment expense, the related asset is also included in segment assets.

Segment liabilities do not include borrowings and other liabilitiesthat are incurred for financing rather than operating purposes.


6/11

Intra-enterprise transactions are eliminated while preparing enterprisefinancial statements, except to the extent that such intra-enterprise balancesand transactions are within a single segment.

Segment revenue, segment expense, segment assets and segment liabilitiesare determined before intra-enterprise balances

Organisational components for which information is reported internally


7/11

If the risks and returns of an enterprise are affected predominantlyby differences in the products and services it produces, its primary formatfor reporting segment information should be business segmentswith secondary information reported geographically and vice-versa

If they are based neither on individual products or servicesnor to the geographical areas in which it operateschoose anyone as the primary segment with the other secondary segment

If risks and returns of an enterprise are strongly affected by both,as evidenced by a matrixapproachthen the enterprise should use

business segments as its primary segment & geographical segmentsas its secondary reporting format; and


8/11

Business and geographical segments for external reporting purposes

should be those organisational units for which information is reportedto BODs and to CEO for the purpose of evaluating theunitsperformance &for making decisions about future allocations of resources

A segment that meets the definition should not be further segmented

BODs should determine its business segments and geographical segmentsfor external reporting purposes based on the factors in the definitionsrather than on the basis of its system of internal financial reporting

Those segments that do not satisfy the definitions should lookto the next lower level of internal segmentation

If such lower-level segment meets the definition, the criteria in paragraph 27for identifying reportable segments should be applied to that segment


9/11

A segment should be identified as a reportable segment if

Its segment assets are 10% or more of the total assets

Its revenue from sales to external customers and from transactions withother segments is 10% or more of the total revenue of all segments; Or

Its segment result, whether profit or loss, is 10% or more of the combinedresult of all segments in profit or loss whichever is greater; Or

A segment which is not a reportable segment, may be designated as areportable segment at the discretion of the management of the enterprise.

If that segment is not designated as a reportable segment, it should be

included as an unallocated reconciling item.If total external revenue attributable to reportable segments constitutesless than 75% of the total enterprise revenue, additional segments shouldbe identified as reportable segments, even if they do not meet the above


10/11

A segment identified as a reportable segment in immediately precedingperiod should continue to be a reportable segment for the current period

If a segment is a reportable segment in the current period restate to reflectthe newly reportable segment as a separate segment in the preceding-period


11/11

Do the segments reflected in Internal Financial ReportingSystem meet the definitions in Para 5

Use segments reported toBODs & CEOs

Do some segments meet thedefinitions in Para 5

Yes No

May beReportableSegments

Go to nextlevel ofinternal

segmentation

Yes No

Does the segments exceedthe quantitative thresholds

May beReportableSegments

YesNo

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As 24 - Discontinuing Operations