IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 5 sets out the classification and measurement of assets held for sale and the presentation of discontinued operations. This guide explains the criteria, measurement rules and presentation requirements.
What Is IFRS 5?
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations covers two related areas: the accounting for individual assets (or disposal groups) that are available for immediate sale and where sale within one year is highly probable; and the presentation of discontinued operations in financial statements.
Classification as Held for Sale
An asset (or disposal group) is classified as held for sale when: its carrying amount will be recovered principally through a sale transaction rather than through continuing use; it is available for immediate sale in its present condition; management is committed to a plan to sell; an active programme to locate a buyer is in place; the asset is being actively marketed at a reasonable price; the sale is expected to be completed within 12 months; and actions required to complete the sale make it unlikely that significant changes to the plan will be made. All criteria must be met.
Measurement
Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell. They are no longer depreciated once classified as held for sale. If an asset was previously measured at cost, it is simply compared to fair value less costs to sell. A write-down to fair value less costs to sell is recognised in profit or loss; subsequent increases in fair value less costs to sell can be recognised but not exceeding cumulative write-downs.
Discontinued Operations
A discontinued operation is a component of an entity that has been disposed of or is classified as held for sale, and represents a separate major line of business or geographical area. Results of discontinued operations are presented as a single line on the face of the income statement — separate from continuing operations. This presentation continues for all comparative periods shown.
Exam Focus
IFRS 5 is examined in ACCA FR and SBR and is particularly relevant for finance professionals working on group reporting or any business disposal transaction.
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