Divestment
Divestment removes an asset or activity from an organisation through a transaction such as a sale. It can release funds, reduce risk or allow management to focus on other activities, but the economic benefit depends on proceeds, disposal costs, tax, future cash flows forgone and any continuing obligations. A company can divest for strategic reasons even when the unit is profitable. Distinguish a cash sale from a demerger where ownership interests are distributed to existing shareholders.
Worked example
A group can sell a unit for $50 million and incur $3 million of disposal costs. It compares the net proceeds and other effects with the value of retaining the unit, including any shared-service implications.
Common mistake
Treating sale proceeds as pure profit or assuming that an activity should be sold solely because it shows an allocated accounting loss.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |