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Ifrs 5 Non-Current Assets Held For Sale and Discontinued Operations

IFRS 5 provides guidance on the accounting for non-current assets held for sale and discontinued operations. It defines a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. A discontinued operation is a component of an entity's business that represents a separate major line of business or geographical area of operations. Certain conditions must be met for an asset or disposal group to be classified as held for sale, including that the sale is highly probable within one year. Assets held for sale are measured at the lower of carrying amount or fair value less costs to sell, and are presented separately in the statement of financial position. Profits and losses from discontinued operations are also

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179 views

Ifrs 5 Non-Current Assets Held For Sale and Discontinued Operations

IFRS 5 provides guidance on the accounting for non-current assets held for sale and discontinued operations. It defines a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. A discontinued operation is a component of an entity's business that represents a separate major line of business or geographical area of operations. Certain conditions must be met for an asset or disposal group to be classified as held for sale, including that the sale is highly probable within one year. Assets held for sale are measured at the lower of carrying amount or fair value less costs to sell, and are presented separately in the statement of financial position. Profits and losses from discontinued operations are also

Uploaded by

Abdul Hadi Saleem
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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IFRS 5

Non-current Assets Held For Sale


And Discontinued Operations
Definitions & Conditions
Definitions

Held For Sale: A non-current asset whose carrying amount will be recovered principally

through a Sale transaction rather than through continuing use.


Definitions

Discontinued Operation:

 Separately identifiable components

 Represents a major line of the entity’s business

 Part of a plan to dispose of a major line of business or a geographical area

 Subsidiary acquired with a view to resell


Definitions

Disposal Group: A group of assets and possibly some liabilities that an entity intends to

dispose of in a single transaction.


Conditions

a) Available for immediate sale in its present condition allowing for terms that are usual or

customary

b) Sale must be highly probable (expected within 1 year of reclassification)

c) Must be genuinely sold, not abandoned.


Conditions

Highly Probable:

 Management committed to a plan to sell

 Active programme to locate a buyer and complete the sale initiated

 Sale price reasonable compared to its current fair value.

 Sale expected to be complete within one year from the date of classification.

 No indication that there will be significant changes made to the plan of sale.
IFRS 5
Non-current Assets Held For Sale
And Discontinued Operations
Measurement
Initial Measurement

 Measured at the lower of:

• Fair value less costs to sell

• Carrying amount (in accordance with relevant Standard)

 Impairment loss is to be recognised in the statement of profit or loss

 Presented separately within current assets.

 For a disposal group, report related liabilities within current liabilities.


Initial Measurement

 Double entry

• Dr. Asset Held for Sale

• Dr. Impairment loss

• Cr. Non-current asset


Subsequent Measurement

Apply criteria for held for sale:

 Criteria met again

 Criteria not met


Subsequent Measurement

 No further depreciation or amortisation

 Fair value less costs to sell re-measured at every reporting date

 Subsequent increase in fair value less cost to sell can be recognised in the statement of

profit or loss – to the extent the depreciated historical cost would have been if the

impairment had not been recognized


Question
As at 30 September 20X3 Dune’s property in its statement of financial position was:
Property at cost (useful life 15 years) $45 million
Accumulated depreciation $6 million

On 1 April 20X4, Dune decided to sell the property. The property is being marketed by a property agent
at a price of $42 million, which was considered a reasonably achievable price at that date. The
expected costs to sell have been agree at $1 million. Recent market transactions suggest that actual
selling prices achieved for this type of property in the current market conditions are 10% less than the
price at which they are marketed.

At 30 September 20X4 the Property has not been sold.

At what amount should the property be reported in Dune’s statement of financial position as at 30
September 20X4?
Solution
Solution

At 30 September 20X4:

Carrying amount = $37.5 million (45,000 – 6,000 b/f – 1,500 for 6 months; no further

depreciation when classified as held for sale).

Recoverable amount = $36.8 million ((42,000 x 90%) – 1,000)).

Therefore included at $36.8 million (lower of carrying amount and fair value less cost to sell).
IFRS 5
Non-current Assets Held For Sale
And Discontinued Operations
Presentation
Discontinued Operation - Presentation

 Profit or loss after tax disclosed as separate line item

 Separate P&L for continued and discontinued operations

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