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Restructuring provision VS Discontinuing operation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Restructuring provision VS Discontinuing operation

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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  • August 15, 2021 at 4:43 pm #631665
    salman7
    Participant
    • Topics: 76
    • Replies: 36
    • ☆☆

    Dear tutor,

    If there is a scenario that part of operation is discontinued, can we discuss restructuring provision (i.e., redundancy and other costs) and disclosures of discontinued operation as they exist together.

    Thanks and regards,

    August 15, 2021 at 5:23 pm #631667
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6783
    • ☆☆☆☆☆

    It depends – the two can be related but a discontinued operation during the year will not necessarily have associated liabilities at the reporting date. In an “orderly winding down” of an operation, employees may be relocated/transferred to another part of the business, or if a part of a business is discontinued through divestment/sale, employees may be transferred with the business operations – without the selling company incurring redundancy obligations.

    And a restructuring of a business does not necessarily involve discontinuation of an operation – e.g. removing a level of management is a restructuring that does not materially affect the scope of a business (so not discontinuation).

    You have to take care at AAA level not to invent embellishments that expand your answer on matters that are contra-indicated by the scenario – it doesn’t matter how technically correct answer points are if they are simply not relevant.

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