Icai Council Okays Final As24 Proposal

The final proposal on Accounting Standard 24 (AS24) on discontinuance of operations was passed by the central council of the Institute of Chartered Accountants of India (ICAI) and is expected to be made public soon.

The final version is expected to come with major changes on the definition of AS24, the triggering point of operations and the period of consideration, which was mentioned as 'reasonable' in the draft exposure.

The initial version of AS24, according to experts, had many areas which required further clarification. The draft version had thus gathered a lot of debate among practitioners. Areas which required clarification were on the definition of 'discontinuance of operations'.

 

Further plant and machinery of importance, if shifted or disposed off or switched off, could also come under the purview of AS24. These, therefore, according to practitioners should also be disclosed in the notes to accounts.

Triggering point was another part of AS24 that required a re-look. The draft exposure created a lot of confusion on the date of trigger of discontinuance of operation and the provisioning for the purpose. Experts argued whether the date should be the one when a decision at the board level is taken or when the unit is actually closed down.

Further, there are cases when a project is commissioned but is kept un-operational due to various reasons, the draft exposure also remained silent, and therefore required clarification.

In many cases a formal decision at the board level is not taken but from the way the unit is operated it becomes clear that the management is not keen on running the unit, should this also be considered to reflect a true and fair picture to shareholders.

"Should the Board for Industrial and Financial Reconstruction decision for closure be also considered and provisioning therefore made?," was another area that required clarification. The final version of AS24 has cleared all the gray areas.

The council has cleared standards 16 to 23. AS24 is awaited and five others including standards on intangible assets, impairment of assets, initiation of joint venture, and interim financial repositioning is due. Final proposals on these are expected within the end of the current year.