What is Discontinued Operations?
A discontinued operation is a component of a business that either has been disposed of or is classified as held for sale, and represents a separate major line of business or geographical area of operations. Its results are presented separately in the income statement.
How It Works
- Identify the component — a cash-generating unit or group of units with distinct operations.
- Confirm the component meets the IFRS 5 ‘held for sale’ criteria or has already been sold.
- Restate the income statement to present discontinued operations on a single line, net of tax.
- Disclose revenue, expenses, and cash flows of the discontinued operation.
- Restate comparative periods for consistent presentation.
Saudi Context
For Saudi listed groups, discontinued operations disclosures are reviewed by the Capital Market Authority and external auditors. The zakat and tax treatment of the gain or loss on disposal depends on the structure of the transaction and is reported in the annual return filed with ZATCA.
Example
A diversified group sells its food division for SAR 80 million. The division contributed SAR 5 million of after-tax profit to the year and produced a SAR 12 million gain on disposal. Both amounts are shown on the ‘discontinued operations’ line, net of tax.