Arzoo Ltd. is in the business of manufacture of passenger cars and commercial vehicles. The company is working on a strategic plan to shift from the…

Mere gradual phasing out is not considered as discontinuing operation as defined under AS 24, ‘Discontinuing Operations'. Examples of activities that do not necessarily satisfy criterion of the definition, but that might do so in combination with other circumstances, include: Gradual or evolutionary phasing out of a product line or class of service;Discontinuing, even if relatively abruptly, several products within an ongoing line of business;Shifting of some production or marketing activities for a particular line of business from one location to another; andClosing of a facility to achieve productivity improvements or other cost savings. In view of the above, mere gradual phasing out in itself cannot be considered as discontinuing operation. The companies' strategic plan also has no final approval from the board through a resolution and there is no specific time bound activities like shifting of assets and employees. Moreover, the new segment, i.e. the commercial vehicle production line in a new factory has not started.