Skip to content

CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Gupta Pharma Ltd approved and announced a plan in November 2025 to discontinue its Veterinary division. Which one of the following would NOT, by itself, qualify the Veterinary division as a discontinuing operation under AS 24?

Merely reducing output by 20% and reorienting the product mix does not qualify. AS 24 requires the component to be disposed of substantially in its entirety, disposed of piecemeal, or abandoned, and to be a separate major line of business; a gradual scaling down is none of these.

  1. AThe division is sold in a single transaction under a binding sale agreement, and it represents a separate major line of business
  2. BThe division is disposed of piecemeal, with assets sold individually and liabilities settled, and it is a separate major line of business
  3. CThe division is abandoned, and it is a separate major line of business that can be distinguished operationally and for financial reporting
  4. DThe company merely reduces the division's output by 20% and gradually reorients the product mix, without a sale or abandonmentCorrect

Explanation

AS 24 defines a discontinuing operation as a component that the enterprise disposes of substantially in its entirety (e.g., by sale), disposes of piecemeal, or terminates through abandonment, and which represents a separate major line of business or geographical area and is distinguishable. A mere reduction in output or gradual change in product mix is not a discontinuance. The first three options each match one of the permitted modes.

Did you get it right without looking?

One question tells you little. A timed set on AS 24 Discontinuing Operations shows your real accuracy, how long you take and where you lose marks.

Practise AS 24 Discontinuing OperationsFree diagnostic mock

More AS 24 Discontinuing Operations questions