LEMBAGA PIAWAIAN PERAKAUNAN MALAYSIAf
MALAYSIAN ACCOUNTING STANDARDS BOARD

Discontinuing Operations

Introduction

1. This Standard addresses presentation and disclosures relating to discontinuing operations. The presentation and disclosures relating to discontinuing operations had been dealt with briefly in paragraphs 21-24 of FRS 108₂₀₀₄, Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies. This Standard supersedes those paragraphs of FRS 108₂₀₀₄. This Standard is effective for financial statements for periods beginning on or after 1 January 2003. Earlier application is encouraged.

2. The objectives of this Standard are to establish a basis for segregating information about a major operation that an enterprise is discontinuing from information about its continuing operations and to specify minimum disclosures about a discontinuing operation. Distinguishing discontinuing and continuing operations improves the ability of investors, creditors, and other users of financial statements to make projections of the enterprise's cash flows, earnings generating capacity, and financial position.

3. A discontinuing operation is a relatively large component of an enterprise - such as a business or geographical segment that the enterprise, pursuant to a single plan, either is disposing of substantially in its entirety or is terminating through abandonment or piecemeal sale.

4. This Standard uses the term "discontinuing operation" rather than the traditional "discontinued operation" because "discontinued operation" (past tense) implies that recognition of a discontinuance is necessary only at or near the end of the process of discontinuing the operation. This Standard requires that disclosures about a discontinuing operation begin earlier than that - when a detailed formal plan for disposal has been adopted and announced or when the enterprise has already contracted for the disposal.

5. This is a presentation and disclosure Standard. It focuses on how to present a discontinuing operation in an enterprise's financial statements and what information to disclose. It does not establish any new principles for deciding when and how to recognise and measure the income, expenses, cash flows, and changes in assets and liabilities relating to a discontinuing operation. Instead, it requires that enterprises follow the recognition and measurement principles in other Financial Reporting Standards.

6. Under this Standard, information about a planned discontinuance must initially be disclosed in the first set of financial statements issued by an enterprise after (a) it has entered into an agreement to sell substantially all of the assets of the discontinuing operation or (b) its board of directors or other similar governing body has both approved and announced the planned discontinuance. Required disclosures include:

   1. a description of the discontinuing operation;

   2. the business or geographical segment(s) in which it is reported;

   3. the date and nature of the initial disclosure event;

   4. the timing of expected completion;

   5. the carrying amounts of the total assets and the total liabilities to be disposed of;

   6. the amounts of revenue, expenses, and pre-tax profit or loss attributable to the discontinuing operation, and related income tax expense;

   7. the net cash flows attributable to the operating, investing, and financing activities of the discontinuing operation;

   8. the amount of any gain or loss that is recognised on the disposal of assets or settlement of liabilities attributable to the discontinuing operation, and related income tax expense; and

   9. the net selling prices, after disposal costs, from the sale of those net assets for which the enterprise has entered into one or more binding sale agreements, and the expected timing thereof, and the carrying amounts of those net assets.

7. Financial statements for periods after initial disclosure must update those disclosures, including a description of any significant changes in the amount or timing of cash flows relating to the assets and liabilities to be disposed of or settled and the causes of those changes.

8. The disclosures would be made if a plan for disposal is approved and publicly announced after the end of an enterprise's financial reporting period but before the financial statements for that period are authorised for issue. The disclosures continue until completion of the disposal.

9. Comparative information for prior periods that is presented in financial statements prepared after initial disclosure must be restated to segregate the continuing and discontinuing assets, liabilities, income, expenses, and cash flows. By separating discontinuing and continuing operations retrospectively, the ability of a user of financial statements to make projections is improved.

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