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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Kaveri Industries Ltd discontinued its plastics segment during 2025-26. For the year, the segment's revenue was ₹80 lakh, expenses ₹95 lakh, and the pre-tax loss on sale of its assets was ₹12 lakh. The tax rate applicable is 25%, and the tax expense is computed on the pre-tax figures, with tax savings recognised on losses. What is the post-tax loss of the discontinuing operation that Kaveri should disclose in total (operating loss plus loss on disposal)?

The post-tax loss is ₹20.25 lakh. The operating loss of ₹15 lakh and the disposal loss of ₹12 lakh give a pre-tax loss of ₹27 lakh, and the 25% tax saving of ₹6.75 lakh reduces it to ₹20.25 lakh.

  1. A₹27.00 lakh
  2. B₹20.25 lakhCorrect
  3. C₹15.00 lakh
  4. D₹12.00 lakh

Explanation

Operating loss = 80 − 95 = ₹15 lakh. Add loss on disposal ₹12 lakh to get a pre-tax loss of ₹27 lakh. Tax saving at 25% is ₹6.75 lakh, so the post-tax loss is 27 − 6.75 = ₹20.25 lakh. Showing ₹27 lakh ignores the tax effect, which AS 24 requires to be disclosed.

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