Discontinued Operation & Contingencies

May 27th, 2008 Comments off
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In the annual report of a listed entity, we sometimes see term like “ discontinued operation”  and Contingencies This article explains the aforesaid terms 

 

DISCONTINUED OPERATION

 

  • A discontinued operation is a component of an entity that either has been disposed of, or that is classified as held for sale and

 

(a)

  Represents a separate major line of business or geographical area of operations; or

(b)

  Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

©

 Is a subsidiary acquired exclusively with a view to resale

 

  Results and cash flows attributable to a discontinued operation  needs to be disclosed separately from the continuing operations

 

 

CONTINGENCIES

 

  • A contingent liability or asset is a POSSIBLE obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Company or the Group of Companies.

 

 

  • It is important to note that Contingent liabilities and assets are not recognized on the balance sheet of the Company or Group.

 

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Financial Accounting

 
 

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