Assets held for sale measurement is part of IFRS 5 Non-current assets held for sale and discontinued operations. Plans to dispose of assets may be an indicator that the asset(s) may be impaired and may accordingly trigger impairment testing procedures. Any impairments (or reversals of previous impairments) are recognised before the entity classifies the asset(s) as held for sale (see step 1 below).
Once the decision has been made to classify an asset as ‘held for sale’ in accordance with the 5 conditions mentioned in Non-current assets held for sale, the question of measurement arises. At what value will we carry the asset within current assets? IFRS 5 requires the following procedure:
- Before transfer to ‘held for sale’, remeasure the asset if the policy of the entity is to do so. For example, if the asset is land, and the policy of the entity is to carry land under the fair value model of IAS 16, then revalue the land as at the date of transfer. And gain or loss is dealt with under IAS 16. If the entity applies the cost model of IAS 16, no revaluation will take place, but potentially an impairment will be recorded. Assets held for sale – Measurement
- The transfer to current assets (held for sale) then takes place at the LOWER OF:
- The value arrived at in step 1; and
- The ‘fair value less costs to sell’. Note that the revaluation amount (in step 1, if applied) will usually be fair value. ‘Fair value less costs to sell’ is usually a lower amount. Any difference is taken to the Statement of Profit or Loss and Other Comprehensive Income.
- The ‘fair value less costs to sell’ is constantly reviewed, and the asset is kept at a value equal to the lower of that value or its original carrying value prior to recognition in current assets. Costs to sell is defined as: The incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income tax expense.
- Depreciation is not charged as long as the asset is carried within current assets. This is because it is not being used (by definition). Any reduction in value should be captured by the revised ‘fair value less costs to sell’.
Costs to sell need to be discounted if a sale is expected to occur beyond one year. The unwinding of the discount over subsequent reporting periods is then recognised as a finance cost in profit or loss (IFRS 5 17). In practice, discounting selling costs is usually not necessary. A held for sale classification generally requires a completed disposal within a one year period. Discounting may therefore only occur in situations in which the sales transaction is delayed beyond one year in accordance with IFRS 5 9.
The measurement provisions mentioned above of IFRS 5 do not apply to the following assets, which are covered by the Standards listed, either as individual assets or as part of a disposal group:
- deferred tax assets (IAS 12 Income Taxes). Assets held for sale – Measurement
- assets arising from employee benefits (IAS 19 Employee Benefits). Assets held for sale – Measurement
- financial assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement.
- non-current assets that are accounted for in accordance with the fair value model in IAS 40 Investment Property.
- non-current assets that are measured at fair value less estimated point-of-sale costs in accordance with IAS 41 Agriculture.
- contractual rights under insurance contracts as defined in IFRS 17 Insurance Contracts. (IFRS 5 5)
If an entity classifies a CGU, a group of CGUs or similar group of assets as held for sale, the entity measures the disposal group as a whole in accordance with IFRS 5. Any type of asset that is then not specifically excluded from the scope of this standard by IFRS 5 5 is not measured individually, but as part of the disposal group. This may for example include inventories that are part of a disposal group and other current assets.
Assets held for sale Measurement
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