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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Sundaram Auto Ltd. approved and announced a plan in January 2026 to discontinue its tractor division. Which of the following is NOT, by itself, enough to classify the tractor division as a discontinuing operation under AS 24?

A gradual decline in the division's output due to falling demand, with no plan to dispose of it, does not make it a discontinuing operation. AS 24 requires disposal in whole or piecemeal by sale, or abandonment, under a single plan approved and announced.

  1. ASale of substantially all of the division's assets in a single transaction under a binding agreement
  2. BAbandonment of the division in its entirety, with the plan approved and announced
  3. CSale of the division in piecemeal, separate transactions as part of a single coordinated plan
  4. DGradual reduction of the division's output because of falling demand, without any plan to exitCorrect

Explanation

AS 24 requires a disposal, by sale in whole, piecemeal, or abandonment, pursuant to a single plan. A gradual run-down due to demand, without a plan to dispose of the operation, or gradual phasing out, does not qualify. The other three are recognised forms of discontinuance.

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