Definition of a discontinued operation

Learning objectives

• Determine whether a component that has been disposed of or is classified as held for sale is a discontinued operation (separate major line of business or geographical area of operations, single coordinated plan), the Standard setting no threshold.L1, L2, L3, L4
• Justify, in a professional file, whether or not a component is a discontinued operation.L3

Normative references

• IFRS 5 §32Discontinued operation: a component that either has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of such a line or area, or is a subsidiary acquired exclusively with a view to resale.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• Any disposal of a significant asset of the entity is a discontinued operation.L1
• The Portel group sells its operating subsidiary in South America, which is a component: it operates alone on that continent, with its own organisation and cash flows. The CFO asks whether, since the subsidiary accounts for only a small share of consolidated revenue, the sale can be excluded from discontinued operations. Write a note that settles the point, specifying what the assessment rests on and ruling out any numeric threshold.L4