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 para 3 of 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 circum-stances, include: (1) Gradual or evolutionary phasing out of a product line or class of service; (2) Discontinuing, even if relatively abruptly, several products within an ongoing line of business; (3) Shifting of some production or marketing activities for a particular line of business from one location to another; and (4) Closing of a facility to achieve productivity improvements or other cost savings. In view of the above the answers are: (i) No, the companies' strategic plan has no final approval from the board through a resolution and there is no specific time bound activities like shifting of assets and employees. Above all, the new segment i.e. commercial vehicle production line in a new factory has not started. (ii) No, the resolution is salient about stoppage of the Car segment in definite time period. Though, sale of some assets and some transfer proposal were passed through a resolution to the new factory, closure road map and new segment starting roadmap are missing. Hence, AS 24 will not be applicable. (iii) Yes, phased and time bound programme resolved in the board clearly indicates the closure of the passenger car segment in a definite time frame and will constitute a clear roadmap. Hence, this action will attract compliance of AS 24.