Imagine Rajesh & Co. Pvt. Ltd. runs three divisions: textiles, steel, and chemicals. They decide to shut down the chemicals division entirely. How should this be shown in the financial statements? That's exactly what AS 24 — Discontinuing Operations answers.
AS 24 applies when a company decides to sell, abandon, or otherwise dispose of a relatively large component of its business — one that represents a separate major line of business or geographical area. The keyword here is relatively large — shutting down a single product line within a division doesn't qualify. The divested component must be distinguishable operationally and for financial reporting purposes (think: it can be separately identified in segment reporting). A simple restructuring where you relocate a factory does not count as a discontinuing operation.
The most exam-critical concept is the Initial Disclosure Event (IDE) — the point from which a company must start disclosing the discontinuation. The IDE is the earlier of: (a) the enterprise entering into a binding sale agreement for substantially all the assets of that component, OR (b) the Board of Directors formally approving the plan AND announcing it publicly (e.g., press release, public filing). Once the IDE occurs, disclosures are mandatory in that period's financial statements and all subsequent periods until the operation is fully disposed of or abandoned.
What must be disclosed? AS 24 requires: a description of the discontinuing operation, the business segment it belongs to, the date and nature of the IDE, the expected timeline for completion, carrying amounts of total assets and total liabilities to be disposed, revenue, expenses, and pre-tax profit/loss attributable to that operation, and net cash flows (separately for operating, investing, and financing activities). These disclosures appear either on the face of the financial statements or in the notes, but the revenue and expenses must be clearly separated. One more important rule: if a company abandons or withdraws from the plan after disclosure has started, that fact itself must be disclosed — you can't just quietly stop mentioning it. This section is asked frequently as a 4–5 mark question, often testing the IDE definition or what exactly needs to be disclosed.