Objective: IFRS 5 specifies accounting for assets held for sale and the presentation and disclosure of discontinued operations.
- Applies to all non-current assets and disposal groups
- Excludes deferred tax assets, employee benefit assets, and financial instruments
- Two main components: measurement and presentation
Held for Sale: A non-current asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.
Criteria for classification:
- Asset available for immediate sale in present condition
- Sale highly probable
- Active program to locate buyer initiated
- Sale expected within one year
- Asset marketed at reasonable price
- Unlikely significant changes to plan
Extension beyond one year: Permitted only if delay caused by events beyond entity's control and entity remains committed to sale.
| Measurement Aspect | Requirement |
|---|---|
| Initial Measurement | At lower of carrying amount and fair value less costs to sell |
| Subsequent Measurement | At lower of carrying amount and fair value less costs to sell |
| Impairment Losses | Recognized in profit or loss |
| Reversals of Impairment | Recognized up to cumulative impairment loss previously recognized |
| Depreciation | Ceases once classified as held for sale |
Note: Assets held for sale are not depreciated even if they are still being used.
Discontinued Operation: A component of an entity 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.
- Component is a cash-generating unit or group of cash-generating units
- Must represent a separate major line of business or geographical area
- Part of a single coordinated plan to dispose of
Scenario: Company XYZ decides to sell its entire retail division in Europe
Classification: Discontinued operation (separate geographical area)
Presentation: All results of retail division presented separately in statement of comprehensive income
Disclosure: Detailed information about assets, liabilities, income, expenses, and cash flows
- Statement of Financial Position: Assets held for sale presented separately from other assets
- Liabilities: Liabilities of disposal group presented separately
- Statement of Comprehensive Income: Single amount comprising:
- Post-tax profit/loss of discontinued operations
- Post-tax gain/loss on measurement to fair value less costs to sell
- Cash Flow Statement: Cash flows of discontinued operations disclosed
| Category | Disclosure Requirements |
|---|---|
| Assets Held for Sale | Description, facts of sale, expected timing, carrying amounts |
| Discontinued Operations | Revenue, expenses, pre-tax profit/loss, related tax expenses |
| Impairment Losses | Amounts recognized and reversals in period |
| Cash Flows | Operating, investing, financing cash flows of discontinued operations |
| Segment Information | Reportable segment containing discontinued operation |
- If criteria for held for sale no longer met, cease classification
- Measure assets at lower of:
- Carrying amount before classification as held for sale adjusted for depreciation
- Recoverable amount at date of decision not to sell
- Adjustment included in profit or loss from continuing operations
- Disclose facts and circumstances leading to decision
- Assets acquired exclusively with view to resale qualify as held for sale
- Must meet criteria within one year of acquisition
- Typically expected to be sold within three months of acquisition
- Measurement at fair value less costs to sell at acquisition
Definition: Non-current assets that the company has decided to sell rather than continue to use.
Presentation
Presented in a separate line on the balance sheet.
Reclassification from PPE to NCAHFS
Conditions for classification as held for sale (S.A.L.E):
- S: (Sale): is decided at a reasonable price from an active market
- A: (Available): Asset is available for immediate sale in its current condition
- L: (Locate): Active program to locate a buyer is initiated
- E: (Expected): Sale is expected within one year
Measurement
Before classification, the asset must be measured at the lower of:
- Carrying Amount (CA)
- Fair Value less Costs to Sell (FV - Costs to Sell)
Carrying Amount: $15,000
Fair Value less Costs to Sell: $16,000 - $2,000 = $14,000
Measurement: $14,000 (lower value)
Impairment Loss: $1,000 (recognized in SOPL)
Subsequent Measurement
- At each reporting date, remeasure at the lower of carrying amount and fair value less costs to sell
- No depreciation is charged after classification
- Reversal of impairment losses is allowed
Presentation of Liabilities
Liabilities associated with NCAHFS are presented in a separate line in liabilities.
Revaluation Model
Revaluation surplus associated with NCAHFS is presented in OCI in a separate line in equity.
Discontinued Operations
A component of the entity that has been disposed of or is classified as held for sale:
- Presented as a separate major line in the income statement
- Results are presented net of tax
- Includes both profit from operations and gain from disposal
Gain from disposal of discontinued operations: $Y (net of tax)
Net profit/(loss) from discontinued operations: $Z