Discontinued Operations explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A single amount on the face, a fuller analysis below it, and a tax line of its own — the presentation is built so that continuing performance can be read without the disposal in the way.
The separate section
Where the analysis is presented in the Statement of Profit and Loss, it shall be presented in a section identified as relating to discontinued operations, i.e. separately from continuing operations.
That sits alongside the Ind AS 1 para 82 requirement for a single amount for the total of discontinued operations as a line item in the profit or loss section — the face carries the total, the section carries the analysis.
Tax on discontinued operations
In case there are any taxes payable or tax credits available on profits or losses of discontinued operations, the same needs to be disclosed as a separate line item on the Statement of Profit and Loss, when presenting a separate analysis as per para 33(b) of Ind AS 105.
Tax expense on the face is bifurcated into current and deferred, and both relate to the entity as a whole. If tax attributable to a discontinued operation stayed inside those lines, the profit from continuing operations would be struck after a tax charge that includes tax on activities the company no longer has.
Splitting it out means the continuing-operations result is complete and self-consistent — revenue, expenses and tax all relating to the business that remains. That is the entire purpose of the Ind AS 105 presentation: a reader projecting future performance should be able to do so from the continuing section alone.
The same logic drives the requirement to present the discontinued total as a single amount on the face rather than letting its revenue and expenses run through the ordinary line items.
Earnings per equity share
Computation of basic and diluted earnings per share should be made in accordance with Ind AS 33 Earnings Per Share.
And a specific disclosure requirement: the nominal value of equity shares should be disclosed along with the earnings per share figures, as required by Ind AS 33.
That matters because EPS is not comparable across companies with different face values. A company with Rs. 1 shares and one with Rs. 10 shares reporting the same earnings show EPS figures that differ tenfold without any difference in performance.
Where dilution comes from
Diluted EPS draws on the instruments disclosed elsewhere in the accounts — shares reserved for issue under options and contracts under clause (h) of the share capital note, and terms of any securities convertible into equity or preference shares along with the earliest date of conversion under clause (j).
Ind AS 33 also supplies the definition used for warrants in the equity presentation — financial instruments which give the holder the right to acquire equity shares.
Regulatory deferral account balances
Note 8 of the General Instructions to the Statement of Profit and Loss requires changes in regulatory deferral account balances for the reporting period to be presented in the Statement of Profit and Loss in accordance with the relevant Ind AS.
Under Ind AS 114, the net movement in all regulatory deferral account balances relating to items recognised in other comprehensive income shall be presented as separate line items in OCI — so the balances split between the profit or loss section and OCI according to where the underlying items sit.
Common mistakes
- Running discontinued operation revenue and expenses through the ordinary line items.
- Leaving tax on discontinued operations inside the main tax expense.
- Presenting EPS without the nominal value of equity shares.
- Ignoring instruments disclosed under clauses (h) and (j) when computing diluted EPS.