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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Which of the following is NOT, by itself, enough to qualify as a discontinuing operation under AS 24 for Rohini Pharma Ltd?

Gradual phasing out of a product line by moving production within the same segment does not qualify. AS 24 needs a distinguishable major line or geographical area disposed of substantially in entirety, abandoned, or sold piecemeal under a plan, which a mere internal shift is not.

  1. ASelling substantially all of a distinct line of business under a binding agreement, with separate operations and cash flows
  2. BAbandoning a major geographical area of operations that is distinguishable for financial reporting
  3. CGradually phasing out a product line by shifting its production to other lines of the same segmentCorrect
  4. DTerminating a business segment through piecemeal sale of its assets under a formal plan

Explanation

AS 24 requires the operation to be a distinguishable component, with assets, liabilities and results separately identifiable, and to be disposed of substantially in its entirety or abandoned or piecemeal sold. Gradual phasing out of a product line or shifting production within the same segment does not qualify, because it is not a disposal of a separate major line of business.

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