Discontinuing Operations

7/21/2019 Discontinuing Operations

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Discontinuingoperations



Impairment of Non-Financi

Asset

Carryingamount

Recoverable

amount

Fair value lesscosts to sell

Value in use

Higher

Loer



Non-current asset hel! for sa

"#FR$ %&Non-current asset hose recoverable amount be principally recovere! through sale rather tcontinuing use'

Carrying

amount

Recoverable

amount

Fair value lesscosts to sell

Value in use

I(N)R*

Loer



De+nition

Represents a separate ma,or line of business ogeographical area of operations

Is a part of a single-coor!inate! plan to !ispose of a separate mof business or geographical operations

Is a subsi!iary acuire! e.clusively ith a vie to r



Con!itions to be classi+e! a

hel! for sale Available for imme!iate sale in its present

con!ition

/he sale must be highly probable



0hat is highly probable1

Commitment from the

management

Activeprogram to

locate abuyer

$ale isinten!e!

be compleithin on

year

/he selliprice mus

reasonab

Actions reuire!to complete theplan are more

li2ely to happen'



Initial 3easurement of NCA

HF$

Carrying Amount

Recoverable Amount

Fair Valueless costs to

sell

Loer

amount

LoerNo accounting

problem

LoerImpairment

Loss

Impairment lo

Asset



$ubseuent 3easurement

Carrying Amount

FV Less C/$

Loeramount

Loer (AIN

Loer I3#AIR3*N/



Charge against the Impairment Loss

Asset ..Impairment Loss ..

*stablish a revaluation surplus

Asset ..Revaluation $urplus ..



#resentation

Current Asset

No more!epreciation

AssetsLiabspresesepara

No retroactivepresentation



Income $tatement #resentat

#ost-ta. pro+t or loss on the!iscontinue! operation an! the post-

gain or loss on the !isposal of the asor !isposal group constituting the!iscontinue! operation'



4alance $heet #resentation

$eparate presentation of the folloing5

Assets that are hel! for sale separate from o

assets Assets measure! at the loer of CA an! FV

C/$'Liabilities that are hel! for sale separate fro

the other liabilities'

Non-!epreciation of the NCA-HF$'



$ample #roblems

)n )ctober 67896%7 hen the carrying amount of the nassets of a business segment as %93' :omi signe! alegally bin!ing contract to sell the business segment' /sale is e.pecte! to be complete! by 3arch ;67896< at

selling price of =%3' In a!!ition7 prior to 3arch ;6789the sale contract obliges :omi to terminate the employof certain employees of the business segment incurrine.pecte! termination costs of ;3 to be pai! on >une ;896<' /he segment?s revenues an! operating e.penses896% respectively ere ;93 an! ;@3' 4efore income ho much ill be reporte! as loss from !iscontinue!



)n )ctober 67896%7 hen the carrying amountnet assets of a business segment as %93' :om

signe! a legally bin!ing contract to sell the busegment' /he sale is e.pecte! to be complete!3arch ;67896< at a selling price of =%3' In a!prior to 3arch ;67896<7 the sale contract oblig :omi to terminate the employment of certain

employees of the business segment incurring ae.pecte! termination costs of ;3 to be pai! on;97 896<' /he segment?s revenues an! operatine.penses for 896% respectively ere ;93 an! 4efore income ta.7 ho much ill be reporte!

loss from !iscontinue! operations1

CARR:IN( A3)N/

FAIR VAL*

C)$/$ /) $*LL

R*V*N*$*B#*N$*$

Loer Amount =83

CA loer amount ILoss

%93 =83

Impairment Loss

Revenues *.penses

(ainELoss;93 ;@3 @3

Loss = 8M

Total Loss from DiscontinuedOperations = 16M



In 896%7 Ram In!ustries !eci!e! to !iscontinue Laminating Division7 a separately i!enti+able coof Ram?s business' At December ;67 896%7 the !has not been completely sol!' Hoever7 negotiathe +nal an! complete sale are progressing in a manner7 an! it is probable that the !isposal ill complete! ithin a year' Analysis of the recor!sthe folloing5)perating loss for the year #@79Loss on !isposal of some assets !uring 896% *.pecte! operating loss in 896< =%979*.pecte! gain in 896< on !isposal of !ivision8997999

Assuming a ;%G ta. rate7 ho much ill be rep



In 896%7 Ram In!ustries !eci!e! to !iscontinue iLaminating Division7 a separately i!enti+ablecomponent of Ram?s business' At December ;67

the !ivision has not been completely sol!' Hoevnegotiations for the +nal an! complete sale areprogressing in a positive manner7 an! it is probathe !isposal ill be complete! ithin a year' Anathe recor!s !isclose! the folloing5

)perating loss for the year #@799Loss on !isposal of some assets !uring 896%%97999*.pecte! operating loss in 896< =%979*.pecte! gain in 896< on !isposal of !ivision

8997999

ignore

ignore

)#*RA/IN( L)$$ @7999L)$$ )N DI$#)$AL )F A$$*/$ %97999

TOTAL LOSS 949,

=7999 B "699G- ;%G& L)$$ )N

DI$C)N/*D )#*RA/I)N$LOSS = 616,8!

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Discontinuing Operations