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IFRS 5 Non current assets held for Sales and Discontinued Operations -…
IFRS 5 Non current assets held for Sales and Discontinued Operations
IFRS 5 objectives
Specify the accounting of assets held for sale and the presentation and disclosure of discontinued operations
sets out principles for reporting information about discontinued operations, enabling used of GSs to more easily evaluate the future performance and cash flows
Separate disclosure of results relating to discontinued operations will allow FS users to more accurately evaluate the likely performance of operations that will be generation income in future periods.
Non current asset classifications
NC assets already held by the entity
classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use
Either, asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable
Or, appropriate level of management is committed to a plan to sell the asset and an active programme to locate a buyer and complete the plan has been initiated
Asset must be actively marketed for sale at a price that is reasonable to its current fair value
the sale should be expected to qualify for recognition as a completed sale within 1 year of the classification date
It should also be unlikely that the plan will change significantly or be withdrawn
NC asset is acquired exclusively with a view to its subsequent disposal
classified as held for sale at the acquisition date only if the 1 year requirement is met
assets normally regarded as non current, that are acquired exclusively for resale, cannot be seen as current unless they meet IFRS 5 criteria to be classified as held for sale
If either of the above are met after year end, they cannot be applied within the period's FSs
If either are met after year end, but before final issue of FSs, entity shall disclose the information in FS notes
When classified as a NC asset held for sale, consequences for the asset are:
asset is subject to an impairment review, with recoverable amount based on fair value less costs to sell as there is a commitment to sell
if the asset is subject to depreciation, this will no longer be charged from the date of classification
the asset is classified out of NC assets ad shown separately in the SFP
If the asset is accounted for using revaluation, revaluation is performed first before an impairment review
Measurement of a NC asset (disposal group) held for sale
Valued at the lower of carrying amountor fair value less costs to sell
When disposal group is measured at fair value when initially classified as held for sale, an impairment is recognized (IAS 36) if the fair value less costs are less than carrying amount
Gain for any subsequent increase in fair value less costs to sell of an asset can be recognized, but not in excess of the cumulative impairment loss
disposal group must not be depreciated or amortised.
Interest and other expenses attributable to the liabilities of a disposal group can continue to be recognised
Within FSs, NC assets held for sale, amounts relating to NC assets held for sale that are part of equity, and liabilities relating to NC assets held for sale are individual to that period; no comparative year figure will be shown
NC assets for sale must separate the types of NC asset classes within this inside the disposal notes of FSs, as per IFRS 5
A description of the facts/circumstances of the sale, and those leading to the expected disposal/timing of expected disposal should also be disclosed in FS notes for the period