NON CURRENT ASSETS HELD
FOR SALE (NCAHS) AND
DISCONTINUED OPERATIONS
IFRS - 5
N R GOVINDARAJAN
CHARTERED ACCOUNTANT
FCA,GRAD.CWA,DISA,CISA
OVERVIEW
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Introduction
Scope and objectives
Definitions
Para 8 conditions
Para 9 exceptions
Disposal assets
OVERVIEW
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Partial and piecemeal disposals
Abandoned assets
Changes in disposal plan
Presentation and disclosures
Summary of measurement principles
IGAAP VS IFRS
Introduction
• Provides a Frame work for accounting for Non
current assets held for sale (NCAHS)
• Replaces IAS 35 – Discontinuing operations
• Presentation and disclosure of Non current
assets held for sale and discontinued operations
• Realisation of carrying amount through sale and
not through use
• Sale should be highly probable and available for
immediate sale
• Terms and conditions for sale should be usual
and customary for such assets
AS 24 VS IND AS 24
• COMPARISON
Scope and objectives
• Applies to all recognised non current
assets or disposal group of an entity
• Not applicable where other IFRS is
applicable
• IAS 12 – Deferred tax assets
• IAS 19 – Assets arising from employee
benefits
• IAS 39 – Financial Asssets
Scope and objectives
• IAS 40 – Non current assets accounted
under fair value approach
• IAS 41- Non current assets that are
measured at fair value less point of sale
costs
• IFRS 4 – contractual rights under
Insurance contracts
Definitions
• Disposal group
• Discontinued operations
Para 8 conditions
• To classify any asset or group as NCAHFS or
DG the following conditions are to be met:
• The asset is available for immediate sale
• Management must be committed to a plan to sell
the asset
• Active program to locate the buyer and complete
the plan must be initiated
• Asset or disposal group must be actively
marketed for a sale at a price reasonable in
relation to its fair value
Para 8 conditions
• Action required to complete the plan
indicate that it is unlikely that plan will be
withdrawn or significantly changed
• The sale is highly probable within 1 year
of classification as held for sale ( subject to
exceptions as per para 9)
• CASE STUDY 1
Para 9 conditions
• Para 9 allows exception to the condition of one year
period in respect of sale of such assets
• In case of circumstances beyond the control of the entity
the sale could not be completed and
• The entity is committed to the plan to sell the assets, the
assets would still be classified as held for sale
• Sufficient evidence should be available for the
commitment
• Three situations are contemplated under para 9 giving
the conditions for exception cases to be applied
Para 9 conditions
• The following conditons are to be fulfilled
for the application of exception rule:
• Conditions imposed by others
• Restrictions imposed by third parties
• Unexpected circumstances that were
previously considered unlikely
• APPENDIX B – IFRS 5
• CASE STUDY 4
Disposal assets
• Where an entity acquires some assets which it intends to
sell due to regulatory requirement etc then such assets
shall meet the requirements of para 8 for being classfied
as NCAHS
• If not, a short period of 3 months is provided to meet the
requirements from the date of acquisition
• In case the conditions are met after the balance sheet
date then it should not classify the assets as NCAHS
• However, if the conditions are met after the balance
sheet date and but before they are authorised, then
disclosures are to be made in notes
Partial and piecemeal disposals
• When assets or disposal groups meet the
conditions for NCAHS at different points it
is considered as not a coordinated plan for
disposal
• In such cases each asset should meet the
criteria for classification as NCAHS
• When the part of an asset is sold it does
not fall within the scope of IFRS 5
Abandoned assets
• Abandonment of assets or business would not
constitute sale and hence such assets cannot be
classified as held for sale as carrying amount
would be recovered only thorough continuing
use
• Temporary non use is not abandonment
• Eg: An entity shutting down operations due to
low demand and is in full working condition and
could commence once the situatation improves,
cannot term it as “abandoned operations”
Changes in disposal plan
• NCAHS once not meeting the criteria would be
reclassified as held for use
• The measurement principles would change accordingly
• It would be lower of
• The carrying amount before classification as NCAHS
adjusted for items such as depreciation,amortisation,
revaluation had such assets been treated as not held for
sale and;
• The recoverable amount on the date of reclassification
as per IAS 36 – Impairment of Assets
• The adjustment would be shown in the Income
Statement as a part of continuing operations
Presentation and disclosures
• It should enable the users of FS to evaluate the
financial effects of discontinued operations and
disposal of non current assets
• NCAHS and DG should be presented separately
from other assets and liabilities in the statement
of financial position
• Statement of Comphrensive income should
show a single amount of Profit or loss of
discontinued operations and its analysis
Presentation and disclosures
• The following information pertaining to NCAHS
should be given in the year in which it is so
classified or sold:
• Description of the asset
• Facts and circumstances of sale or expected
manner and timing of disposal
• Gain/loss or impairment recognised
• In case of change of plan to sell, the description
of facts and circumstances leading to the
decision and its effect on the operations of the
current and prior period