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NON-CURRENT ASSETS HELD FOR SALE AND

DISCONTINUED OPERATIONS
(PFRS No. 5)
Objective of PFRS 5 to specify the accounting for assets held for sale and the
presentation and disclosure of discontinued operations.
a. Assets that meet the criteria to be classified as held for sale
to be measured at the lower of carrying amount and fair value less costs to sell
depreciation on such assets to cease.
b. Assets that meet the criteria to be classified as held for sale
to be presented separately on the face of the balance sheet
the results of discontinued operations to be presented separately in the income
statement.
A discontinued operation as 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.
is part of a single coordinated plan to dispose of a separate major line of business or
geographical area of operations
is a subsidiary acquired exclusively with a view to resale.
A component of an entity may be
a subsidiary,
a major line of business or
geographical segment
whose operations and cash flows can be clearly distinguished , operationally and for financial
reporting purposes from the rest of the entity.
A component can be clearly distinguished operationally and for financial reporting purposes if its
assets
liabilities
revenues
expenses
are directly attributable to the component.
Timing of Reporting a component is classified as discontinued operations at the date
the entity has actually disposed of the operation or
when the operation meets the criteria to be classified as held for sale.
PFRS 5 prohibits the retroactive classification as a discontinued operation when the
discontinued criteria are met after the balance sheet date.

Component Classified as Held for Sale


An entity shall classify a component of an entity as held for sale if its carrying amount will be
recovered principally through a sale transaction rather than through continuing use. The
following conditions must be met:
a. Management is committed to a plan to sell.
b. An active program to locate a buyer is initiated.
c. The sale is expected to qualify for recognition as a completed sale within one year from
the date of classification as held for sale. The sale is highly probable within one year from
the date of classification as held for sale.
d. The component is being actively marketed for sale at a sales price that is reasonable in
relation to its fair value.
e. Actions required to complete the plans indicate that it is unlikely that the plan will be
significantly changed or withdrawn.

Measurement of Assets of a Component Classified as Held for Sale


a. The assets of a component held for sale shall be measured at the lower of
its carrying amount and
fair value less costs to sell
b. When a sale is expected to occur beyond one year, the entity shall measure the costs to
sell at their present value. Any increase in the present value of the costs to sell that
arises from the passage of time shall be presented in profit or loss as a financing cost.

Income Statement Presentation


PFRS 5 provides that the sum of
the post tax profit or loss of the discontinued operation and
the post tax gain or loss recognized on the measurement to fair value less cost to sell or
the fair value adjustment on the disposal of the assets
should be presented as a single amount on the face of the income statement below the
income from continuing operations.
The following are disclosed in the notes to financial statements:
a. The amount of revenue, expenses and income or loss attributable to the discontinued
operation during the current period.
b. Any impairment loss that is recognized when as of the balance sheet and before the sale
of the discontinued operation the fair value less cost to sell of the net assets of the
discontinued operations is lower than their carrying amounts.
c. The termination cost of employees and other costs which are directly incurred as a result
of the discontinuance are shown as part of discontinued operations.
d. Any gain or loss from the actual disposal of the assets and settlement of liabilities of a
discontinued operation is recognized on the date of sale or date of settlement. Such gain
or loss is part of the discontinued operation.

Balance Sheet Presentation


PFRS 5 provides that an entity shall also present separately on the face of the balance sheet
the following information:
a. Assets of the component held for sale shall be presented as a single amount under
current assets.
b. Assets of the component held for sale are measured at the lower of fair value less cost to
sell and their carrying amount.
c. Liabilities of the component shall be presented separately under current liabilities.
d. The assets and liabilities of the component cannot be offset against each other.
Special Notes
a. Non-depreciation non-current assets of the component held for sale shall not be
depreciated (or amortized) while it is classified as held for sale or while it is part of a
disposal group classified as held for sale.
b. Interest and other expenses attributable to the liabilities of a disposal group classified
as held for sale shall continue to be recognized.

Cash Flow Presentation


PFRS 5 provides that the net cash flows attributable to the operating, investing and financing
activities of a discontinued operation shall be separately presented on the face of the cash
flow statement or disclosed in the notes.

Non Current Asset Classified as Held for Sale


a. A non-current asset is an asset that does not meet the definition of an asset.
b. A disposal group is a group of assets to be disposed of, by sale or otherwise, together as
a group in a single transaction, and liabilities directly associated with those assets that
will be transferred in the transaction.
c. A non current asset is classified as held for sale following the same criteria for a
discontinued operation being classified as held for sale.

Measurement of Non Current Asset


a. A non current asset held for sale shall be measured at the lower of its carrying amount or
fair value less cost to sell.
b. The write down to fair value less cost to sell is treated as an impairment loss.
c. If the non current asset is a disposal group, the impairment is apportioned across the
assets.
Goodwill is written off first.
Any remainder of the impairment loss is allocated pro rata to the non currents
assets in the group based on their carrying amounts.
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d. If subsequently, there is an increase in the fair value less cost to sell, a gain may be
recognized but not to exceed the impairment loss previously recognized.
e. A non current asset classified as held for sale shall not be depreciated.

Special Notes
a. An entity shall not classify as held for sale a non current asset or disposal group that is to
be abandoned because its carrying amount will be recovered principally through
continuing use.
b. If the assets to be abandoned are a major line of business or geographical area of
operations, they are reported as discontinued operations at the date on which they are
actually abandoned.
c. An entity shall measure the non current asset that ceases to be classified as held for sale
at the lower of
carrying amount before the asset was classified as held for sale adjusted for any
depreciation or amortization that would have been recognized if the asset had not
been classified as held for sale
recoverable amount at the date of the subsequent decision not to sell.
d. The assets and liabilities of a disposal group shall be presented separately and cannot be
offset against each other.
e. The assets of a disposal group shall be presented as a single amount and described as
non current assets classified as held for sale under current assets.
f. The liabilities of the disposal group shall be presented as a single amount and described
as liabilities associated with non current assets classified as held for sale under current
liabilities.

July 2009