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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Which of the following, by itself, would NOT qualify as a discontinuing operation under AS 24?

Gradual phasing out of a product line or class of service, or shifting production from one location to another in the ordinary course, does not by itself qualify as a discontinuing operation under AS 24. Sale or abandonment of a major line of business or geographical area under a formal plan does qualify.

  1. ADisposal of a major line of business in a single plan through sale of substantially all its assets
  2. BAbandonment of a separate geographical area of operations under a formal plan
  3. CDisposal of the entire business through piecemeal sale of its assets and settlement of its liabilities, under a single plan
  4. DGradual phasing out of a product line or class of service, or shifting of production from one location to another, in the ordinary courseCorrect

Explanation

AS 24 states that gradual phasing out of a product line, discontinuing a class of service, shifting of some production or marketing activities from one location to another, and closing a facility to improve productivity, do not by themselves qualify as discontinuing operations. The other three are listed examples of disposal or abandonment as a whole under a plan.

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