IFRS 5: NONCURRENT ASSETS HELD

FOR SALE
AND DISCONTINUED OPERATIONS
 Scope

• The purpose of IFRS 5 is to specify the

accounting for assets held for sale and the
presentation and disclosure of discontinued
operations. The measurement provisions of this
International Financial Reporting Standard (IFRS)
do not apply to deferred tax assets, assets
arising from employee benefits, financial assets
within the scope of IAS 39, non current assets
accounted for in accordance with the fair value
model in IAS 40, non current assets that are
measured at fair value less estimated point-of-
sale costs under IAS 41, and contractual rights
under insurance contracts as defined in IFRS 4.
 DEFINITIONS OF KEY TERMS (in accordance with IFRS 5)

• Held for sale. The carrying amount

of a non current asset will be
recovered mainly through selling the
asset rather than through usage.
• Disposal group. A group of assets
and possibly some liabilities that an
entity intends to dispose of in a
single transaction.
 Cont…..
For a non current asset or disposal
group to be classified as held for
sale, the asset must be available for
immediate sale in its present
condition and its sale must be highly
probable. In addition, the asset must
be currently being marketed actively
at a price that is reasonable in
relation to its current fair value.
• The sale should be completed, or expected to be so, within
a year from the date of the classification.
• The actions required to complete the planned sale will have
been made, and it is unlikely that the plan will be
significantly changed or withdrawn.
• For the sale to be highly probable, management must be
committed to selling the asset and must be actively looking
for a buyer.
• It is possible that the sale may not be completed within one
year. In this case, the asset could still be classified as held
for sale if the delay is caused by events beyond the entity’s
control and the entity is still committed to selling the asset.
 MEASUREMENT OF NONCURRENT
ASSETS THAT ARE HELD FOR SALE
• When non current assets or disposal
groups are classified as held for sale,
they are measured at the lower of
the carrying amount and fair value
less costs to sell.
• When the sale is expected to occur in
over a year’s time, the entity should
measure the cost to sell at its
present value. Any increase in the
present value of the cost to sell that
arises should be shown in profit and
loss as a finance cost.
• Any impairment loss is recognized in profit
or loss on any initial or subsequent write-
down of the asset or disposal group to fair
value less cost to sell. Any subsequent
increases in fair value less cost to sell of
an asset can be recognized in profit or loss
to the extent that it is not in excess of the
cumulative impairment loss that has been
recognized in accordance with IFRS 5 or
previously in accordance with IAS 36.
 CHANGE OF PLANS
• If criteria for an asset to be classified as held for sale are no
longer met, then the asset or disposal group ceases to be
held for sale.
• In this case, the asset or disposal group should be valued
at the lower of the carrying amount before the asset or
disposal group was classified as held for sale (as adjusted
for any subsequent depreciation, amortization, or
revaluation) and its recoverable amount at the date of the
decision not to sell.
• Any adjustment to the value should be shown in income
from continuing operations for the period.
• If the criteria are not met, then the individual noncurrent
assets of the group will be reviewed to see if they meet the
criteria to be classified as held for sale.
 DISCLOSURE:
NONCURRENT ASSETS
• Noncurrent assets held for sale and assets of
disposal groups must be disclosed separately
from other assets in the balance sheet. The
liabilities must also be disclosed separately in the
balance sheet.
• Several other disclosures are required, including
a description of the noncurrent assets of a
disposal group, a description of the facts and
circumstances of the sale, and the expected
manner and timing of that disposal.
• Any gain or loss recognized for impairment or
any subsequent increase in the fair value less
costs to sell should also be shown in the
applicable segment
 DISCONTINUED OPERATIONS:
PRESENTATION AND DISCLOSURE
• A discontinued operation is a part of an
entity that has either been disposed of or
is classified as held for sale and:
• (a) Represents a separate major line of
business or geographical area of
operations;
• (b) Is part of a single coordinated plan to
dispose of separate major line of business
or geographical area of operations; or
• (c) Is a subsidiary acquired exclusively
with a view to resale.
• In the income statement, the total of
the after-tax profit or loss of the
discontinued operation and the after-
tax gain or loss recognized on the
measurement to fair value less cost
to sell (or on the disposal) should be
presented as a single figure.
• IFRS 5 requires detailed disclosure of
revenue, expenses, pretax profit or loss,
and the related income tax expense,
either in the notes or on the face of the
income statement. If this information I
presented on the face of the income
statement, the information should be
separately disclosed from information
relating to continuing operations.