IFRS 5 Disposal group acquired for resale
Measuring and presenting subsidiaries acquired with a view to resale and classified as held for sale
A subsidiary acquired with a view to sale is not exempt from consolidation in accordance with IAS 27 Consolidated and Separate Financial Statements. However, if it meets the criteria in paragraph 11, it is presented as a disposal group classified as held for sale. Example 13 illustrates these requirements.
Entity A acquires an entity H, which is a holding company with two subsidiaries, S1 and S2. S2 is acquired exclusively with a view to sale and meets the criteria to be classified as held for sale. In accordance with paragraph 32(c), S2 is also a discontinued operation.
The estimated fair value less costs to sell of S2 is CU135. A accounts for S2 as follows:
- initially, A measures the identifiable liabilities of S2 at fair value, say at CU 40
- initially, A measures the acquired assets as the fair value less costs to sell of S2 (CU 135) plus the fair value of the identifiable liabilities (CU40), ie at CU175
- at the end of the reporting period, A remeasures the disposal group at the lower of its cost and fair value less costs to sell, say at CU130. The liabilities are remeasured in accordance with applicable IFRSs, say at CU35. The total assets are measured at CU130 + CU35, ie at CU165
- at the end of the reporting period, A presents the assets and liabilities separately from other assets and liabilities in its consolidated financial statements as illustrated in Example 12 Presenting non-current assets or disposal groups classified as held for sale, and
- in the statement of profit and loss, A presents the total of the post-tax profit or loss of S2 and the post-tax gain or loss recognised on the subsequent remeasurement of S2, which equals the remeasurement of the disposal group from CU135 to CU 130.
Further analysis of the assets and liabilities or of the change in value of the disposal group is not required.