Statement of Profit and Loss for 20X2 :
The Statement of Profit and Loss of Delta Company for the year 20X2 can be presented as follows:
(Amount in Rs. lakhs)
| 20X2 | 20X1 | |||
| Turnover | 140 | 140 | ||
| Operating expenses | (90) | (92) | ||
| Impairment loss | (10) | (20) | ||
| Provision for employee termination benefits | (30) | — | ||
| Pre-tax profit from operating activities | 10 | 28 | ||
| Interest expense | (25) | (15) | ||
| Profit (loss) before tax | (15) | 13 | ||
| Profit from continuing operations before tax (see Note 5) | 20 | 15 | ||
| Income tax expense | (6) | (7) | ||
| Profit from continuing operations after tax | 14 | 8 | ||
| Loss from discontinuing operations before tax (see Note 5) | (35) | (2) | ||
| Income tax expense | 10 | 1 | ||
| Loss from discontinuing operations after tax | (25) | (1) | ||
| Profit (loss) from operating activities after tax | (11) | 7 | ||
Note to Financial Statements for 20X2
The following is Note 5 to Delta Company’s financial statements:
On 15 November 20Xl, the Board of Directors had announced a plan to dispose of Company’s Clothing Division, which is also a separate segment as per AS 17, Segment Reporting. The disposal is consistent with the Company’s long-term strategy to focus its activities in the areas of food and beverage manufacture and distribution, and to divest unrelated activities. On 30 September 20X2, the Company signed a contract to sell the Clothing Division to Z Corporation for Rs. 60 lakhs.
Clothing Division’s assets are written down by Rs. 10 lakhs (previous year Rs. 20 lakhs) before income tax saving of Rs. 3 lakhs (previous year Rs. 6 lakhs) to their recoverable amount.
The Company has recognised provision for termination benefits of Rs. 30 lakhs (previous year Rs. nil) before income tax saving of Rs. 9 lakhs (previous year Rs. nil) to be paid by 30 June 20X3 to certain employees of the Clothing Division whose jobs will be terminated as a result of the sale.
At 31 December 20X2, the carrying amount of assets of the Clothing Division was Rs. 80 lakhs (previous year Rs. 85 lakhs) and its liabilities were Rs. 35 lakhs (previous year Rs. 15 lakhs), including the provision for expected termination cost of Rs. 30 lakhs (previous year Rs. nil). The process of selling the Clothing Division is likely to be completed by 31 January 20X3.
The following statement shows the revenue and expenses of continuing and discontinuing operations:
| Continuing Operations (Food and Beverage Divisions) | Discontinuing Operation (Clothing Divisions_ | Total | ||||
| 20X2 | 20X1 | 20X2 | 20X1 | 20X2 | 20X1 | |
| Turnover | 100 | 90 | 40 | 50 | 140 | 140 |
| Operating expenses | (60) | (65) | (30) | (27) | (90) | (92) |
| Impairment loss | —- | —- | (10) | (20) | (10) | (20) |
| Provision for employee termination | —- | —- | (30) | —- | (30) | —- |
| Pre-tax loss from operating activities | 40 | 25 | (30) | 3 | 10 | 28 |
| Interest expense | (20) | (10) | (5) | (5) | (25) | (15) |
| Profit (loss) before tax | 20 | 15 | (35) | (2) | (15) | 13 |
| Income tax expense | (6) | (7) | 10 | 1 | 4 | (6) |
| Profit (loss) from operating activities after tax | 14 | 8 | (25) | (1) | (11) | 7 |