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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Sarvodaya Textiles Ltd. has a spinning division and a weaving division. On 15 February 2026 its board approved a detailed formal plan to sell the weaving division, and on 20 March 2026 it signed a binding sale agreement with a buyer. The financial year ends on 31 March 2026. Under AS 24, the 'initial disclosure event' for the weaving division is the earlier of which two occurrences?

The initial disclosure event is the earlier of the enterprise entering into a binding sale agreement for substantially all assets of the operation, or the board approving a detailed formal plan and announcing it. Physical delivery, payment receipt, or meeting dates do not trigger disclosure under AS 24.

  1. ABoard approval of a detailed formal plan, or entering into a binding sale agreement, whichever is earlierCorrect
  2. BDate of actual physical delivery of assets, or receipt of full sale consideration
  3. CDate of the annual general meeting, or the balance sheet date
  4. DDate of announcement in the press, or filing of the annual return

Explanation

AS 24 defines the initial disclosure event as the occurrence of the earlier of (a) the enterprise entering into a binding sale agreement for substantially all assets of the operation, or (b) the board approving a detailed, formal plan for discontinuance and making an announcement of the plan. Here the board approval on 15 February 2026 comes first, provided the plan is announced. Delivery of assets or receipt of consideration is not the trigger.

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