NON-CURRENT
ASSETS
HELD FOR SALE
- the why and the
wherefore
NON-CURRENT ASSETS HELD FOR SALE
Revenue for the sale of goods can only be recognised if …….
•
the entity has transferred … ownership … AND
•
the entity retains neither … managerial involvement …
nor effective control … AND
•
the amount of revenue can be measured reliably … AND
•
it is probable the [amount will be received] … AND
•
the costs … can be measured reliably
ALL MUST BE SATISFIED
AASB 118.14
NON-CURRENT ASSETS HELD FOR SALE
But what if an entity knows that it will dispose of an
asset in the next period,
but it doesn’t yet meet the requirements of AASB 118?
If it can’t recognise the revenue, it can’t recognise the
costs - unless another Standard applies
NON-CURRENT ASSETS HELD FOR SALE
Financial Instruments
AASB 139
Other Receivables
AASB 136
Provision for Impairment
(Allowance for Doubtful
Debts)
Inventories
AASB 102
Lower of cost or net
realisable value
Investment Property
AASB 140
Other Non-current Assets
(including Discontinued Operations)
FAIR VALUE
FAIR VALUE
AASB 5
NON-CURRENT ASSETS HELD FOR SALE
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.
Thus AASB 5 requires early
recognition of losses, but does
not permit early recognition of
profits.
NON-CURRENT ASSETS HELD FOR SALE
Accounting entries:
DR
DR
DR
CR
Carrying
value
At lower of cost and
net realisable value
Non-Current Assets held for sale
Accumulated Depreciation
(Anticipated) Loss on disposal
Infrastructure, Property, Plant & Equipment
From the date of transfer
•
NO MORE DEPRECIATION
•
NO MORE REVALUATIONS
Separately
shown in P&L
The asset is literally removed from your Asset
Register, and recorded separately.
NON-CURRENT ASSETS HELD FOR SALE
For AASB 5 to apply, you must be
able to make a realistic estimate of
the sale proceeds.
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 (or disposal group) must be
available for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such assets (or disposal groups)
and its sale must be highly probable.
The emphasis is in the Standard
NON-CURRENT ASSETS HELD FOR SALE
8
For the sale to be highly probable,
•
the appropriate level of management must be
committed to a plan to sell the asset (or disposal group), and
•
an active program to locate a buyer and complete the
plan must have been initiated.
•
Further, the asset (or disposal group) must be actively
marketed for sale at a price that is reasonable in relation to its
current fair value.
•
In addition, the sale should be expected to qualify for
recognition as a completed sale within one year from the date
of classification, ...
NON-CURRENT ASSETS HELD FOR SALE
Mere Council resolution
that it intends to sell is
NOT ENOUGH.
In practical terms, you need an
enforceable contract for sale
by the time of audit.
If in doubt, discuss it with your Auditor early.
NON-CURRENT ASSETS HELD FOR SALE
Technically, AASB 5 also applies to the trade-in of plant, etc.
10
Sale transactions include exchanges of non-current
assets for other non-current assets when the exchange has
commercial substance in accordance with AASB 116 Property,
Plant and Equipment.
However, provided the loss on disposal is NOT MATERIAL,
your Auditor will usually accept this being managed through
your Plant Register, and certainly it is more convenient to do
so.
NON-CURRENT ASSETS HELD FOR SALE
DISCLOSURES
There are plenty and, because every such sale is different,
the Model Statements cannot provide comprehensive
examples.
Refer to AASB 5 paragraphs 30 - 42
NON-CURRENT ASSETS HELD FOR SALE
GOOD DISCLOSURE
NON-CURRENT ASSETS HELD FOR SALE
GOODNESS GRACIOUS!!
NON-CURRENT ASSETS HELD FOR SALE
If you haven’t got any, DON’T SHOW
•
the subtotal in current assets, or the empty line item
•
the subtotal in current liabilities, or liabilities relating to
non-current assets held for sale
•
anything for discontinued operations in P&L
NON-CURRENT ASSETS HELD FOR SALE
It has been in the Model Statements:
Page 9
and pages 124, 125, 126.
The explanations contained in the Model Statements
are as important as the presentation examples.
NON-CURRENT
ASSETS
HELD FOR SALE
- the why and the
wherefore