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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Kaveri Textiles Ltd, a listed company, decided on 10 January 2026 to sell its entire knitwear division. The board approved a detailed formal plan and signed a binding sale agreement with Arvind Garments Ltd on 20 February 2026. The financial year ends on 31 March 2026. Under AS 24, the 'initial disclosure event' for the knitwear division is the earlier of the date the enterprise has entered into a binding sale agreement and the date the board has approved and announced a detailed, formal plan. The board announced the plan to employees and the public on 25 January 2026. What is the initial disclosure event date?

The initial disclosure event is 25 January 2026. AS 24 takes the earlier of the board's approved and announced detailed formal plan and a binding sale agreement. The announcement on 25 January precedes the 20 February agreement, while the earlier 10 January decision was not an announced detailed plan.

  1. A10 January 2026
  2. B25 January 2026Correct
  3. C20 February 2026
  4. D31 March 2026

Explanation

AS 24 treats the initial disclosure event as the earlier of (a) the enterprise entering into a binding sale agreement, or (b) the board approving a detailed formal plan and announcing it (or having started to implement it). Announcement was on 25 January 2026 and the sale agreement on 20 February 2026, so the earlier is 25 January. The 10 January date was only a decision, without announcement of the formal plan, so it does not qualify.

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