Financial Reporting · Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Discontinued Operations under Ind AS 105 (CA Final Financial Reporting)

Updated 5 October 2026 · Fact-checked

A discontinued operation is a component of an entity that has been disposed of or is classified as held for sale, and that represents a separate major line of business or geographical area, or is part of a single plan to dispose of one, or is a subsidiary acquired only for resale. You present one single amount on the face of the statement of profit and loss and analyse it in the notes.

Understand Discontinued Operations

An entity may sell or close a big part of its business. If that part stays mixed inside normal profit, users cannot predict future earnings. Ind AS 105 solves this by showing the part being exited separately from continuing operations.

A component of an entity has operations and cash flows that can be clearly distinguished, operationally and for financial reporting, from the rest of the entity. In practice it is a cash-generating unit or a group of cash-generating units.

A component becomes a discontinued operation when it has either been disposed of, or is classified as held for sale, and it also meets one of three tests. It represents a separate major line of business or geographical area of operations. Or it is part of a single co-ordinated plan to dispose of such a line or area. Or it is a subsidiary acquired exclusively with a view to resale.

Held for sale and discontinued are different ideas. Held for sale is a classification for a non-current asset or disposal group, which can be small. Discontinued operation is a presentation category, and only a large component qualifies. Every discontinued operation has been disposed of or is held for sale. But many held-for-sale items are not discontinued operations.

Presentation is the exam focus. On the face of the statement of profit and loss you show a single amount comprising the post-tax profit or loss of the discontinued operation, plus the post-tax gain or loss on measurement to fair value less costs to sell, or on disposal of the assets or disposal group. A detailed analysis of this amount goes on the face or in the notes. Comparatives are re-presented so that earlier periods also show the operation as discontinued. An operation that stops being held for sale is not shown as discontinued any more, and the amounts are reclassified into continuing operations for all periods.

Key rules to remember

Discontinued operation test: Component of entity AND (disposed of OR held for sale) AND (separate major line of business or geographical area OR part of a single plan to dispose of one OR subsidiary acquired only for resale); The entity must pass the component test, the disposed-of or held-for-sale test, and at least one of the three size/nature tests. Failing the size/nature tests means it is only a held-for-sale item or an ordinary disposal.
Single amount on face of statement of profit and loss: Post-tax profit or loss of discontinued operation + post-tax gain or loss on remeasurement to fair value less costs to sell or on disposal; Shown as one line. Analysis of revenue, expenses, pre-tax profit, tax and the gain or loss is given on the face or in notes.
Measurement on classification as held for sale: Lower of carrying amount and fair value less costs to sell; Any write-down is part of the discontinued operation result. Depreciation stops from the date of classification.
Comparatives: Re-present prior period statement of profit and loss for the discontinued operation; The balance sheet comparatives of assets held for sale are not re-presented.
Net cash flow disclosure: Operating, investing and financing cash flows of the discontinued operation; Disclose on the face of the cash flow statement or in the notes.
Earnings per share link: Show basic and diluted EPS for continuing and discontinued operations; Ind AS 33 requires this disclosure, either on the face or in the notes for the discontinued part.

How to solve Discontinued Operations questions

Use this order for any question on identification or presentation of a discontinued operation.

1Check whether the part is a component, with operations and cash flows clearly distinguishable from the rest of the entity.
2Check whether it has been disposed of, or is classified as held for sale under the Ind AS 105 criteria. Look at dates against the reporting date.
3Apply the size test: separate major line of business or geographical area, part of a single plan, or subsidiary acquired for resale. If none applies, stop, it is not a discontinued operation.
4If it qualifies, remeasure the disposal group at the lower of carrying amount and fair value less costs to sell, and compute any write-down.
5Compute the post-tax result of the operation for the year, and add the post-tax gain or loss on remeasurement or disposal, to get the single amount.
6Present the single amount separately from continuing operations, and re-present the comparative period.
7Give the analysis: revenue, expenses, pre-tax result, tax, and the gain or loss on remeasurement or disposal. It may be on the face, in a section identified as relating to discontinued operations, or in the notes. Add net cash flows by activity.
8State the conclusion in one line with the reason.

Quickest way: Three-gate check and one-line presentation

When to use it: Use it for case-scenario MCQs and short written answers where time is tight.

Gate 1: is it a distinguishable component?
Gate 2: is it sold or held for sale at the reporting date?
Gate 3: is it a major line or area, part of one plan, or a subsidiary bought for resale?
If all three pass, compute one post-tax figure: operating result plus write-down or gain.
Write: shown as a single line below continuing operations, comparatives re-presented, analysis in notes.

Common mistakes in Discontinued Operations

Treating every held-for-sale asset as a discontinued operation.
Both topics sit in the same standard and use the held-for-sale criteria.
Fix: Always run the size test. Selling one machine or a small unit is held for sale only, not discontinued.
Showing the pre-tax profit of the discontinued operation and the loss on remeasurement as separate lines on the face instead of one single amount.
Students follow the usual layout of profit before tax.
Fix: The single post-tax amount must be on the face. The detailed analysis may also be on the face, in a section identified as relating to discontinued operations and separate from continuing operations, or it may be given in the notes.
Not re-presenting the comparative statement of profit and loss.
The current year is the focus of the numbers given.
Fix: Restate prior period results so the operation is shown as discontinued in all periods presented.
Re-presenting the prior year balance sheet to show assets held for sale.
Students extend the comparative rule to the balance sheet.
Fix: Only the statement of profit and loss comparatives are re-presented. Prior balance sheet amounts are not reclassified.
Continuing depreciation after classification as held for sale.
Students forget that classification changes measurement.
Fix: Stop depreciation from the classification date. Measure at the lower of carrying amount and fair value less costs to sell.
Treating a decision to abandon an operation as held for sale or discontinued at once.
Abandonment sounds like disposal.
Fix: Assets to be abandoned are not held for sale. They are shown as discontinued only when they are actually abandoned.

Worked examples

Example 1

Case: Zenith Ltd manufactures and sells consumer goods in India and also runs a separate textile division that sells only in Europe. The division has its own plants, management and cash flows, and is a distinguishable component. It is a major line of business for Zenith. On 15 January 2027 the board committed to a plan to sell the division and started an active programme to find a buyer. At 31 March 2027 (reporting date) the division can be sold immediately in its present condition, buyer negotiations are under way, the asking price is reasonable relative to the division's fair value, and the sale is expected to complete within 12 months. Is it a discontinued operation at 31 March 2027, and how is it presented?

Show the solution

Component: the textile division has its own plants, management and cash flows, clearly distinguishable from the rest of Zenith. Yes.
Held-for-sale criteria at 31 March 2027: (a) available for immediate sale in its present condition, met; (b) management committed to a plan to sell, met by the board decision of 15 January 2027; (c) active programme to locate a buyer initiated, met; (d) sale highly probable and expected to complete within one year, met; (e) price reasonable relative to current fair value, met.
All criteria are met at the reporting date, so the division is classified as held for sale at 31 March 2027.
Size test: it is a separate major line of business. Yes.
All three gates are passed, so it is a discontinued operation.
Presentation: show one post-tax amount below continuing operations in the statement of profit and loss, covering the division's result and any write-down to fair value less costs to sell.
Re-present the comparative year's profit or loss so the division also appears as discontinued. Give the analysis in the notes.

Answer: Yes. The textile division is a discontinued operation at 31 March 2027. Present a single post-tax amount separately from continuing operations, re-present the comparative period, and give the analysis in notes.

Example 2

Case: Orion Ltd has a division classified as a discontinued operation at 31 March 2027. Post-tax operating loss for the year is ₹12,00,000. The division's disposal group has a carrying amount of ₹90,00,000 and fair value less costs to sell of ₹84,00,000. Assume the whole carrying amount is made up of non-current assets within the measurement scope of Ind AS 105, so any write-down is allocated to those assets. Tax saving on the write-down is ₹1,80,000. What single amount is shown on the face of the statement of profit and loss?

Show the solution

Assumption: the disposal group consists of non-current assets within the measurement scope of Ind AS 105, so the full write-down is allocated to those assets and recognised in the discontinued operation result.
Measure the disposal group at the lower of carrying amount ₹90,00,000 and fair value less costs to sell ₹84,00,000, which is ₹84,00,000.
Write-down before tax = ₹90,00,000 − ₹84,00,000 = ₹6,00,000.
Post-tax write-down = ₹6,00,000 − ₹1,80,000 = ₹4,20,000.
Post-tax operating loss = ₹12,00,000.
Single amount = ₹12,00,000 + ₹4,20,000 = ₹16,20,000 loss.

Answer: A single post-tax loss of ₹16,20,000 is shown on the face of the statement of profit and loss for the discontinued operation. The breakdown goes in the notes.

Exam tips

In MCQs, check the size test first. Many wrong options describe a small asset sale as a discontinued operation.
Write the single-amount rule in full: post-tax result plus post-tax gain or loss on remeasurement or disposal.
Remember that comparatives of the statement of profit and loss are re-presented, while balance sheet comparatives are not.
In written answers, follow the provision, facts, conclusion format and name the criterion that the facts satisfy.
Do not forget the link to Ind AS 33: EPS from continuing and discontinued operations is disclosed.

Practice questions from Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Discontinued Operations in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Discontinued Operations: frequently asked questions

What is the definition of a discontinued operation under Ind AS 105?

It is a component of an entity that has been disposed of or is classified as held for sale. It must also represent a separate major line of business or geographical area, be part of a single plan to dispose of one, or be a subsidiary acquired only for resale.

What is the difference between held for sale and a discontinued operation?

Held for sale is a classification for non-current assets or disposal groups of any size. A discontinued operation is a presentation category for a large component that is sold or held for sale. All discontinued operations are sold or held for sale, but not all held-for-sale items are discontinued.

How is a discontinued operation presented in the statement of profit and loss?

You show one amount on the face, being the post-tax result of the operation plus the post-tax gain or loss on remeasurement or disposal. The analysis is given on the face or in the notes. Comparatives are re-presented.

Is an operation to be abandoned a discontinued operation?

An asset or group to be abandoned is not held for sale, because its value comes from use and not sale. It is presented as discontinued only when it is actually abandoned, provided it meets the size test.