IFRS Standard: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

“Non-current assets held for sale” deals with the situation where an entity decides that a non-current asset (which by definition is held for continuing use in the business) is no longer to be held for continuing use. Rather it is to be sold. “Discontinued operations” arise when an entity decides to discontinue a part of its business.

IFRS 5 Objective and Scope

Objective

1 The objective of this IFRS is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. In particular, the IFRS requires:

  1. 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, and
Read More

IFRS 5 Classification as held for sale

Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners

6 An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.

7 For this to be the case, the asset

Read More

IFRS 5 Measurement non-current assets held for sale

Measurement of non-current assets (or disposal groups) classified as held for sale

Measurement of a non-current asset (or disposal group)

15 An entity shall measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell.

15A An entity shall measure a

Read More

IFRS 5 Presentation and disclosure

30 An entity shall present and disclose information that enables users of the financial statements to evaluate the financial effects of discontinued operations and disposals of non-current assets (or disposal groups).

Presenting discontinued operations

31 A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of

Read More

IFRS 5 Extension completion sale

Appendix B Application supplement

This appendix is an integral part of the IFRS.

Extension of the period required to complete a sale

B1 As noted in paragraph 9, an extension of the period required to complete a sale does not preclude an asset (or disposal group) from being classified as held for sale if the delay is caused by

Read More

IFRS 5 Availability for immediate sale

Guidance on implementing IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

This guidance accompanies, but is not part of, IFRS 5.

Availability for immediate sale (paragraph 7)

To qualify for classification as held for sale, a non-current asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are

Read More

IFRS 5 Expected completion sale

Completion of sale expected within one year (paragraph 8)

Example 4

To qualify for classification as held for sale, the sale of a non-current asset (or disposal group) must be highly probable (paragraph 7), and transfer of the asset (or disposal group) must be expected to qualify for recognition as a completed sale within one year (paragraph 8).

Read More

IFRS 5 Exception one-year rquirement

Exceptions to the criterion in paragraph 8

An exception to the one-year requirement in paragraph 8 applies in limited situations in which the period required to complete the sale of a non-current asset (or disposal group) will be (or has been) extended by events or circumstances beyond an entity’s control and specified conditions are met (paragraphs 9 and B1).

Read More

IFRS 5 Has an asset been abandoned?

Determining whether an asset has been abandoned

Paragraphs 13 and 14 of the IFRS specify requirements for when assets are to be treated as abandoned. Example 8 illustrates when an asset has not been abandoned.

Example 8

An entity ceases to use a manufacturing plant because demand for its product has declined. However, the plant is maintained in workable condition

Read More

IFRS 5 Abandoned discontinues operation

Presenting a discontinued operation that has been abandoned

Paragraph 13 of the IFRS prohibits assets that will be abandoned from being classified as held for sale. However, if the assets to be abandoned are a major line of business or geographical area of operations, they are reported in discontinued operations at the date at which they are abandoned. Example 9

Read More