Non-current Assets Held for
Sale and Discontinued
Operations: IFRS 5
Wiecek and Young
IFRS Primer
Chapter 4
Non-current Assets Held for Sale
and Discontinued Operations
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Related standards
IFRS 5
Current GAAP comparisons
IFRS financial statement disclosures
Looking ahead
End-of-chapter practice
Related Standards
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3
FAS 144 Accounting for the impairment or
disposal of long-lived assets
FAS 131 Disclosures about segments of an
enterprise and related information
Related Standards
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IFRS 8 Operating segments
IAS 36 Impairment of assets
IAS 1 Presentation of financial statements
IFRS 5 - Overview
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5
Objective and scope
Classification as held for sale
Measurement
Presentation and disclosure
IFRS 5 – Objective and Scope
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Standards for non-current assets with
carrying values to be recovered through sale
rather than use
Covers classification, measurement,
presentation of assets held for sale, and
reporting of discontinued operations
IFRS 5 – Objective and Scope
Assets held for sale: refers to all such
recognized non-current assets, and includes
cash-generating units called disposal groups
that may include current and non-current
assets and liabilities
Discontinued operation: a component of an
entity that either has been disposed of or is
classified as held for sale
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IFRS 5 – Classification as Held
for Sale
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Stringent conditions:
Available for immediate sale in existing
condition
Sale must be highly probable
Likely that significant change will not be
made to the plan
Sale transaction will take place within one
year from classification as held for sale
IFRS 5 – Measurement
On reclassification as held for sale
- Measure at lower of carrying amount and fair
value less costs to sell
- Write-down is an impairment loss
- Impairment loss is recognized in profit or loss
- No depreciation is taken while classified as
held for sale
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IFRS 5 – Measurement
Remeasure at each balance sheet date
- Increase in fair value less costs to sell is
recognized as a gain in profit or loss
- Increase limited to cumulative impairment
losses previously recognized
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IFRS 5 – Measurement
Changes to a plan of sale
Item is reclassified
Remeasured to lower of:
(a) Carrying amount before classified as held
for sale less any depreciation that would
have been taken if it had not been held for
sale, and
(b) Its recoverable amount (i.e., higher of fair
value less costs to sell and value in use)
- Difference is recognized in profit or loss from
continuing operations
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IFRS 5 – Measurement
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IFRS 5 – Presentation and
Disclosure
Objective of presentation and disclosure on
income statement:
 To provide useful information separately
about continuing operations and
discontinued operations so that users can
assess the potential for future returns and
operating cash flows
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IFRS 5 – Presentation and
Disclosure
Discontinued operation must be a component
of an entity that:
(a) Represents a separate major line of
business or geographic area of operation
(b) Has clearly distinguishable operations and
cash flows from the rest of the entity
(c) Is part of a single coordinated plan to
dispose of the component, or
(d) Is a subsidiary acquired exclusively with a
view to resell
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IFRS 5 – Presentation and
Disclosure
Income statement related disclosures:
 Revenues, expenses, pre-tax profit/loss from
operations, related income tax expense
 Gain/loss on disposal from remeasurements
and related income tax
 Total of after-tax amounts from above
 Net cash flows from operations, investing,
and financing re discontinued operations
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IFRS 5 – Presentation and
Disclosure
Other:
 Restate to make prior period’s income
statement comparable
 Report adjustments to amounts reported as
discontinued in prior periods
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IFRS 5 – Presentation
and Disclosure
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Objective of presentation and disclosure on
the statement of financial position:
To allow financial statement readers to
assess the effects of items whose cash flows
will come from their sale rather than their use
IFRS 5 – Presentation and
Disclosure
Statement of financial position:
 Non-current assets classified as held for sale
and assets in disposal groups are reported
separately from other assets
 Liabilities included in disposal groups are
reported separately from other liabilities
 Disclose separately information about the
major categories of assets and liabilities
included above
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IFRS 5 – Presentation and
Disclosure
Statement of financial position:
 Do not reclassify assets and liabilities on
comparative financial statements of prior years
Notes to the statements:
 Descriptive information about the assets and
disposal groups, amounts of write-downs and
remeasurements and where they are reported,
information about removal of assets and groups from
the held-for-sale category
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Current GAAP Comparisons
Page 138 of 164 of
http://www.kpmg.co.uk/pubs/IFRScomparedtoU.S.GAAPAnOvervi
ew(2008).pdf
20
IFRS Financial Statement
Disclosures
The Nestlé Group
http://www.nestle.com/Resource.axd?Id=24E5A5E293F8-43A3-956E-0F259448CB90
Balance sheet disclosures
page 6 of 118
Note 25 to financial statements pages 71-72 of 118
Marks & Spencer [Annual Report 2007>Complete
annual report (pdf)]
http://www.marksandspencer.com/gp/node/n/56268031
Income statement disclosures
page 54 of 104
Cash flow information
page 56 of 104
Discontinued operations Note 7 page 66 of 104
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Looking Ahead
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What qualifies as a “component” for
purposes of defining a discontinued
operation is changing – to be defined as an
“operating segment” as in IFRS 8
Exposure draft to introduce change issued in
late 2008
End-of-Chapter Practice
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End-of-Chapter Practice
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End-of-Chapter Practice
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End-of-Chapter Practice
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End-of-Chapter Practice
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End-of-Chapter Practice
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