IFRS 5: NON-CURRENT ASSETS HELD FOR
SALE AND DISCONTINUED OPERATIONS
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Assets classified as noncurrent in
accordance with PAS 1 are classified as
current assets only if they meet the
criteria to be classified as held for sale
under PFRS 5
Noncurrent asset – an asset that does not
meet the definition of a current asset
Noncurrent assets within the scope of
PFRS 5
o PPE
o Investment property measured
under the cost model
o Investment
in
associate,
subsidiary, or joint venture
o Intangible assets
Noncurrent assets outside the scope of
PFRS 5
o Deferred tax assets
o Assets arising from employee
benefits
o Financial assets within the scope
of PFRS 9 Financial Instruments
o Investment property measured
under the fair value model
o Biological assets
o Contractual
rights
under
insurance contracts
Disposal group – a group of assets to be
disposed of, by sale or otherwise,
together as a group in a single
transaction, and liabilities directly
associated with those assets that will be
transferred in the transaction
CLASSIFICATION AS HELD FOR SALE
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A noncurrent asset (or disposal group)
is classifies as held for sale or held for
distribution to owners if its carrying
amount will be recovered principally
through a sale transaction rather than
through continuing use
This means that more economic benefits
will be derived from the assets if it is to
be sold rather than continually used
CONDITIONS FOR CLASSIFICATION AS
HELD FOR SALE
A noncurrent asset or disposal group is
classified as held for sale (and consequently,
presented as current asset in the statement of
financial position) if both of the following
conditions are met:
A. The noncurrent asset or disposal group
is available for immediate sale in its
present condition subject only to terms
that are usual and customary
B. The sale is highly probable, as
evidenced by the existence of all of the
following:
a. The entity’s management if
committed on selling the asset
b. The entity is actively locating a
buyer
c. The sale price is reasonable in
relation to the asset’s (or disposal
group’s) current fair value
d. The sale is expected to be completed
within one year from the date of
classification
e. It is unlikely that the plan to sell will
be withdrawn
Note:
Highly probable – connotes a higher
chance of occurrence than probable;
significantly more likely than not
Probable – more likely than not
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Firm purchase commitment – an
agreement with an unrelated party,
binding on both parties and usually
legally enforceable that:
o Specifies all significant terms,
including the price and timing of
transactions, and ‘
o Includes a disincentive for nonperformance that is sufficiently
large to make performance
highly probable
EXCEPTION TO THE ONE-YEAR
REQUIREMENT
An asset (or disposal group) that is not sold
within one year from the date of its
classification as held for sale is reclassified
back to its previous classification (e.g., from
‘held for sale’ back to ‘PPE’)
However, the asset (or disposal group) is
continued to be classified as held for sale if the
following conditions are met:
a. The delay is caused by events beyond
the entity’s control
b. There is sufficient evidence that the
entity remains committed on selling the
asses (or disposal group)
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NONCURRENT ASSETS THAT ARE TO BE
ABANDONED
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EXCLUSIVE VIEW OF SUBSEQUENT
DISPOSAL
A noncurrent asset (or disposal group) that is
acquired exclusively with a view to its
subsequent disposal is classified as held for sale
at the acquisition date if the “sale within one
year” requirement is met and it is highly
probable that the other requirements will be
met within short period of time (usually within
three months)
The probability that a further approval
(if any) of the dividend declaration will
be obtained is considered as part of the
assessment of whether the distribution
is highly probable
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Not classified as held for sale because its
carrying amount will be recovered
through continuing use rather than
principally through sale
Includes those that are to be used to the
end of their economic life or are to be
closed rather than sold
Noncurrent assets that are temporarily
taken out of use are not treated as if they
have been abandoned
MEASUREMENT
EVENT AFTER THE REPORTING PERIOD
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A noncurrent asset or disposal group
that meets the criteria for classification
as held for sale only after the reporting
period:
o NOT CLASSIFIED AS HELD
FOR SALE IN THE CURRENT
PERIOD’S FINANCIAL
STATEMENTS
o The even is treated as a nonadjusting event after the
reporting period
The same treatment is applied to a
component of an entity that meets the
criteria for classification as discontinued
operation only after the reporting
period
Held for sale assets and disposal groups are
initially and subsequently measured at the
lower of carrying amount and fair value less
costs to sell (carrying amount or fair value
less costs to sell, whichever is lower)
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PROPERTY DIVIDENDS
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Noncurrent assets (or disposal groups)
declared as property dividends are
classified as held for distribution to owners
when they are:
o Available for immediate
distribution in their preset
condition
o The distribution is highly
probable
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Fair value
o price that would have been
received to sell as asset or paid to
transfer a liability in an orderly
transaction between market
participants at the measured date
Cost to sell
o incremental costs directly
attributable to the disposal of an
asset or disposal group,
excluding finance costs and
income tax expense
o discounted to their present value
if the sale is expected to occur
beyond one year
Assets classified as held for distribution to
owners are measured at the lower of
carrying amount and fair value less
costs to distribute
Held for sale assets that are acquired as part
of business combination are measured at
fair value less costs to sell, not at fair
value
o Reversal of impairment loss is
allocated to the assets of the
group, except for goodwill, pro
rate on the basis of the carrying
amounts of those assets
CHANGES IN FAIR VALUE LESS COSTS
TO SELL
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Subsequent changes in fair value less
costs to sell
o Recognized in P&L as
impairment losses or gains on
reversal of impairment
Gain on reversal of impairment
o Recognized only to the extent of
cumulative impairment losses
that have been previously
recognized
CHANGES TO A PLAN OF SALE
An asset that ceases to be classified as held for
sale is measured that the lower of the asset’s
DEPRECIATION AN AMORTIZATION
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Held for sale assets are not depreciated
or amortized while they are classified as
held for sale
Interest and other related expenses
attributable to financial instruments
included in a disposal group are
continued to be recognized
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a. Carrying amount before it
was classified as held for sale,
adjusted for any depreciation,
amortization or revaluation
that would have been
classified as held for sale
b. Recoverable amount at the
date of subsequent decision
not to sell
Recoverable amount – the higher of an
asset’s a. fair value less costs of disposal
and its b. value in use
Value in use- present value of estimated
future cash flows expected to arise from
the continuing use of an asset and from
its disposal at the end of its useful life
DISPOSAL GROUP
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On subsequent remeasurement of a
disposal group, the carrying amounts of
any assets and liabilities that re not
within the scope of the measurement
requirements of PFRS 5 but are included
in a disposal group classified as held for
sale shall be remeasured in accordance
with applicable PFRSs before the fair
value less costs to sell of any disposal
group is remeasured
The impairment loss for a disposal
group reduces the carrying amount of
non-current assets in the group that are
within the scope of the measurement
requirement of PFRS 5, in the following
order of allocation:
a. Any goodwill allocated to the group;
and
b. Other assets of the group pro rata on
the basis of carrying amount for each
asset in the unit (group of units)
o Reductions in carrying amounts
are treated as impairment losses
on individual assets
REMOVAL OF AN INDIVIDUAL ASSET OR
LIABILITY FROM A DISPOSAL GROUP
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If an entity removes an individual asset
or liability from a disposal group, the
remaining assets or liabilities of the
disposal group will continue to be
measured as a group only if the group
continues to meet the criteria for
classification as a disposal group
If not, the remaining noncurrent assets
of the group that individually meet the
criteria to be classified as held for sale
are classified as held for sale
The other assets and liabilities that do
not meet the criteria will cease to be
classified as held for sale
DISCONTINUED OPERATIONS
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Component of an entity that either has
been disposed of or is classified as held
for sale, and
a. Represents a major line of
business or geographical area of
operations
b. Part of a single coordinated
plan to dispose of a separate
major line of business or
geographical area of
operations
c. Subsidiary acquired
exclusively with a view to
resale
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PRESENTATION OF DISCONTINUED
OPERATIONS
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Component of an entity
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Comprises operations and cash
flows that can be clearly
distinguished, operationally and
for financial reporting purpose,
form the rest of the entity
Can be a cash-generating unit or
group of CGUs, an operating
segment, a reporting unit, a
geographical area or operations, a
subsidiary, or an asset group
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Non-current
asset held
for sale
The smallest identifiable group of
assets that generated cash inflows
that are largely independent of the
cash inflows from other assets of
group of assets
Disposal
group held
for sale
Discontinue
d operations
Operations and cash flows can be
clearly distinguished operationally and
for financial reporting purposes if the
assets, liabilities, income, and expenses
that are directly attributable to the
component will be eliminated if the
component is to be sold
A discontinued operation occurs when two
things happen:
a. A company eliminated (or will
eliminate) the results of operations and
cash flows of a component of an entity
from its ongoing operations
b. There is no significant continuing
involvement in that component after its
disposal
Results are presented in the statement of
profit or loss and other comprehensive
income as a single amount comprising
the total of the following:
a. Post-tax profit or loss of
discontinued operations
b. Post-tax gain or loss recognized on
the measurement to fair value less
costs to sell or on the disposal of the
assets constituting the discontinued
operation
Results are presented after “profit or
loss from continuing operations”
Classificatio
n
CGU
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Discontinued operations occur at the
earlier of the date that component is
actually disposed of and the date the
criteria for classification as held for sale
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Asset(s)
being
sold
A single
noncurrent
asset
A group
of assets
A
compone
nt of an
entity
Presentation
Statement of
financial
position
Statement of
financial
position
Statement of
financial
position and
Statement of
profit or loss
and other
comprehensiv
e income
A non-current asset or disposal group
held for sale that is not a component of
an entity is presented as continuing
operation
GAINS OR LOSSES ON DISPOSAL OF
DISCONTINUED OPERATIONS
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If the actual disposal of a discontinued
operation occurs in the same period that
the component is classified as “held for
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sale”, the gain or loss on disposal of
discontinued operations is the actual
gain or loss on the disposal
If the actual disposal of a discontinued
operations occurs in a subsequent
period after the component is classified
as “held for sale”, the entity recognizers
an estimated loss on disposal in the
period that the component is classified
as discontinued operations
DIRECT COSTS ASSOCIATED TO
DECISION TO DISPOSE A COMPONENT
Costs or adjustments should be recognized and
shown as part of discontinued operations.
Examples of such costs include:
a. Such items as severance pay or
employee termination costs
b. Additional pension costs
c. Employee relocation expenses
d. Future rentals on long-term leases
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Future operating losses from normal
operations should not be recognized
Only losses and expenses that result
from present obligations are recognized