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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Mehta Industries Ltd. is discontinuing its plastics segment. For the year ended 31 March 2026 the segment's revenue was ₹80 lakh, expenses ₹95 lakh and it incurred a loss on sale of its assets of ₹6 lakh. The tax benefit on the operating loss is ₹4 lakh and on the loss on sale is ₹1 lakh. What pre-tax and post-tax figures must be disclosed respectively as the amount of pre-tax and post-tax profit or loss of the discontinuing operation (including the gain or loss on disposal), as per AS 24?

The pre-tax loss is ₹21 lakh, being the operating loss of ₹15 lakh plus the ₹6 lakh loss on disposal. Deducting the total tax benefit of ₹5 lakh gives a post-tax loss of ₹16 lakh. AS 24 requires both figures including the disposal result.

  1. APre-tax loss ₹21 lakh; post-tax loss ₹16 lakhCorrect
  2. BPre-tax loss ₹15 lakh; post-tax loss ₹11 lakh
  3. CPre-tax loss ₹21 lakh; post-tax loss ₹21 lakh
  4. DPre-tax loss ₹15 lakh; post-tax loss ₹10 lakh

Explanation

Operating loss = 80 - 95 = 15 lakh. Add loss on disposal 6 lakh = pre-tax loss 21 lakh. Tax benefit = 4 + 1 = 5 lakh, so post-tax loss = 16 lakh. Option B omits the disposal loss from the pre-tax figure.

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