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IFRS standards

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

1Objective and scope

IFRS 5 specifies the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. It requires assets meeting the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and to stop being depreciated.

2Key definitions

Held for sale
The carrying amount of a non-current asset (or disposal group) will be recovered principally through a sale transaction rather than through continuing use.
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.
Discontinued operation
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, or is a subsidiary acquired exclusively with a view to resale.

3Classification and measurement

An asset (or disposal group) is classified as held for sale only when it is available for immediate sale in its present condition, and the sale is highly probable: management is committed to a plan to sell, an active programme to locate a buyer has been initiated, the asset is being actively marketed at a reasonable price relative to its current fair value, and the sale is expected to complete within one year of classification.

  • Once classified as held for sale, the asset is measured at the lower of its carrying amount and fair value less costs to sell
  • Depreciation and amortisation STOP from the date of classification, even though the asset has not yet been sold
  • Assets classified as held for sale, and (for a disposal group) the associated liabilities, are presented SEPARATELY on the face of the statement of financial position, not netted against other assets

4Presentation and disclosure

A discontinued operation's results are presented as a single amount on the face of the statement of profit or loss, combining the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the actual disposal - with a required further analysis of that single amount (into revenue, expenses, tax, and the gain/loss on disposal) either on the face of the statement or in the notes.

  • A description of the non-current asset or disposal group, and the facts and circumstances of the sale (or expected sale) and its expected timing
  • For discontinued operations, revenue, expenses, pre-tax profit or loss, and the related income tax expense
  • Net cash flows attributable to operating, investing and financing activities of the discontinued operation

5Examinable focus

What KASNEB tests

Applying the held-for-sale criteria to scenario facts, computing the lower-of-carrying-amount-and-fair-value-less-costs-to-sell measurement (and remembering to stop depreciation), and presenting a discontinued operation as a single line in the statement of profit or loss with the required note analysis, are all standing questions.