IFRS 5
Non-current assets held for sale and
discontinued operations
By; Mohammad Fathi Aouf
History of IFRS 5
Date
Development
September 2002
Project added to IASB agenda
24 July 2003
Exposure Draft ED 4 Disposal of Non-current
Assets and Presentation of Discontinued
Operations published
31 March 2004
IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations issued
22 May 2008
Amended by Improvements to IFRSs 2007 (sale
of a controlling interest in the subsidiary)
16 April 2009
Amended by Improvements to IFRSs
2009 (disclosure requirements in other
standards)
25 September 2014
Amended by Improvements to IFRSs
2014 (changes in methods of disposal)
Non-current assets
• Non-current assets are assets that do not
meet the definition of a current asset.
• A current asset is an asset that satisfies any of
the following criteria
– it is expected to be realized in, or is intended for
sale or consumption in, the entity’s normal
operating cycle
– it is held primarily for the purpose of being traded
Discontinued Operations
• A discontinued operation is a component of
an entity that either has been disposed of, or
is classified as held for sale, and
– represents a separate major line of business or
geographical area of operations,
– is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical
area of operations; or
– is a subsidiary acquired exclusively with a view to
resale.
Objective
• The objective of this IFRS 5 is to specify the
accounting for assets held for sale, and the
presentation and disclosure of discontinued
operations.
Objective contin.
• In particular, the IFRS 5 requires:
– assets that meet the criteria to be classified as
held for sale to be presented separately in the
statement of financial position and the results of
discontinued operations to be presented
separately in the statement of comprehensive
income.
Scope of IFRS 5
• Applies to all recognised non-current assets
and disposal groups of an entity
• Assets classified as non-current in accordance
with IAS 1 Presentation of Financial
Statements shall not be reclassified as current
assets until they meet the criteria of IFRS 5
Scope of IFRS 5 contin.
• If an entity disposes of a group of assets,
possibly with directly associated liabilities (i.e.
an entire cash-generating unit), together in a
single transaction, if a non-current asset in the
group meets the measurement requirements
in IFRS 5, then IFRS 5 applies to the group as a
whole.
• Non-current assets to be abandoned cannot
be classified as held for sale
Example
• An entity has agreed in a directors’ meeting to sell a building, and
has tentatively started looking for a buyer for the building. The price
of the building has been fixed at $4m and a surveyor has valued the
building based on market prices at $3.6m. The entity will continue
to use the building until another building has been found with
equivalent facilities, and in a suitable location for the office staff,
who will not be relocated until the new building has been found.
Additionally, the entity is planning to sell part of its business and
has actively marketed the business at a fair price but, before the
business can be sold, government approval is required and any sale
requires government approval. This means that the sale time is
difficult to determine and it may take longer than one year to sell
the disposal group
Example contin.
– ANSWER The building will not be classified as held-for-sale
as it is not available for immediate sale because, until new
premises have been found, the office staff will remain in
the existing building. Also, the directors have only
tentatively started looking for a buyer which may indicate
that the entity is not committed to the sale. Additionally,
the price being asked for the building is above the market
price, and is not reasonable compared to that price. It is
unlikely that the entity will sell the building for that price.
The disposal group, however, would be classified as heldfor-sale because the delay is caused by events or
circumstances beyond the entity’s control, and there is
evidence that the entity is committed to selling the
disposal group.
Non-current assets
– it is expected to be realised within twelve months
after the reporting period; or
– it is cash or a cash equivalent asset, unless it is
restricted from being exchanged or used to settle
a liability for at least twelve months after the
reporting period
• Assets held for sale and discontinued
operations A guide to IFRS 5 An IAS Plus guide
Presentation and Disclosure
• An asset classified as held for sale should be presented
in the statement of financial position separately from
other assets. Typically a separate heading ‘non-current
assets – held for sale’ would be appropriate. Where a
disposal group is held for sale, the assets and liabilities
within it should also be separately identified. Such
assets and liabilities should not be netted off for
disclosure purposes and presented as a single line
item. The major classes of assets and liabilities of the
disposal group should be presented separately in the
statement of financial position or in the notes.
Presentation and Disclosure contin.
• This disclosure is not, however, required where
the disposal group was classified as held for sale
when it was newly acquired. The separate
presentation is required when the assets are
classified as held for sale. It is therefore not
appropriate to restate prior period figures in the
statement of financial position to reflect the
current classification. An entity should also
provide a description of any non-current assets,
or a disposal group, classified as held for sale or
sold including details of any sale and expected
time scales for disposal.
Presentation and Disclosure contin.
• If a sale has taken place within the reporting
period, then the gain or loss on disposal should
be separately identified either in the statement of
comprehensive income or in the notes. Where
held for sale assets have been included within a
segment as part of the segmental analysis
presented in accordance with IFRS 8 Operating
segments, this information should be highlighted
References
• IFRS CERTIFICATE Learning materials
• Brendan Doyle, BA (Hons) in Accounting
– CPA
• http://www.iasplus.com/en/standards/ifrs/ifrs
5
– Deloitte
• IFRS pocket guide 2014