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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Under AS 24, which of the following is a situation that, by itself, does NOT necessarily make an operation a discontinuing operation?

Gradually phasing out a product line as part of rationalisation does not by itself make an operation discontinuing under AS 24. The standard requires disposal or abandonment of substantially all of a separate major line of business or geographical area, under a single coordinated plan.

  1. AGradually phasing out a product line in a product-range rationalisation, without disposing of a separate major line of businessCorrect
  2. BDisposal of substantially all of a separate major line of business in a single transaction
  3. CAbandonment of a separate major geographical area of operations
  4. DSale of a separate major line of business by piecemeal disposal of assets and settlement of liabilities as part of one coordinated plan

Explanation

AS 24 states that gradual or evolutionary phasing out of a product line or class of service, and shifting of some production or marketing activities between locations, do not by themselves qualify as discontinuing operations. The other three describe disposal or abandonment of a separate major line of business or geographical area under a single plan, which qualify.

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