IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Objective

Sets out the accounting for assets held for sale and the presentation and disclosure of discontinued operations.

All recognised non-current assets and disposal groups, and assets held for distribution to owners.
Some assets are outside its measurement rules (but within presentation), including deferred tax assets, employee benefit assets, financial assets within IFRS 9, investment property at fair value and biological assets at fair value less costs to sell.

Disposal group: A group of assets (and directly associated liabilities) to be disposed of together in a single transaction.
Discontinued operation: A component that has been disposed of or is held for sale and represents a separate major line of business or geographical area (or is part of a single co-ordinated plan to dispose of one, or is a subsidiary acquired exclusively for resale).
Costs to sell: Incremental costs directly attributable to disposal, excluding finance costs and income tax.

Carrying amount will be recovered principally through sale rather than continuing use.
Available for immediate sale in its present condition on usual terms.
Sale is highly probable: management committed to a plan, active programme to find a buyer, marketed at a reasonable price, expected to complete within one year (with limited extensions), and the plan is unlikely to change significantly.
Assets to be abandoned are not held for sale (although an abandoned component may be a discontinued operation).

Measure at the lower of carrying amount and fair value less costs to sell; remeasure the carrying amount under the relevant standards immediately before classification.
Any write-down is an impairment loss in profit or loss; later gains are recognised only up to cumulative losses previously recognised.
Stop depreciating or amortising once classified as held for sale.
Present held-for-sale assets and liabilities separately in the statement of financial position; do not offset them.
Discontinued operations: show a single amount in the statement of profit or loss (post-tax profit or loss plus any post-tax remeasurement or disposal gain or loss), analysed in the notes; restate comparatives.

Description of the asset or disposal group, facts and circumstances of the sale, and expected timing.
Gains or losses recognised and the segment in which it is presented.
For discontinued operations: revenue, expenses, profit before tax, tax, and net cash flows by activity.

Meeting the criteria after the year end is a non-adjusting event — do not reclassify at the year end.
No depreciation once held for sale, even if the asset is still in use until sold.
An impairment in a disposal group is allocated first to goodwill, then to non-current assets within IFRS 5's measurement scope.
Comparatives are restated for discontinued operations in profit or loss, but not in the statement of financial position.

Scenario. A building is classified as held for sale. Its carrying amount is $500k; fair value is $460k and costs to sell are $10k.

Answer: Carry the building at $450k, shown separately as held for sale.

Test your understanding of IFRS 5 with free chapter-wise MCQs and explanations in these question banks.

ICAI CA Intermediate examines Indian Accounting Standards, which are based on but can differ from IFRS. Check your syllabus.