Professional Documents
Culture Documents
Non-Current Assets Held For Sale and Discontinued Operations
Non-Current Assets Held For Sale and Discontinued Operations
CONTENTS
from paragraph
INTRODUCTION IN1
International Financial Reporting Standard 5 Non-current Assets Held for Sale and
Discontinued Operations (IFRS 5) is set out in paragraphs 1–45 and Appendices A–C. All the
paragraphs have equal authority. Paragraphs in bold type state the main principles.
Terms defined in Appendix A are in italics the first time they appear in the Standard.
Definitions of other terms are given in the Glossary for International Financial Reporting
Standards. IFRS 5 should be read in the context of its objective and the Basis for
Conclusions, the Preface to International Financial Reporting Standards and the Conceptual
Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors provides a basis for selecting and applying accounting policies in the absence of
explicit guidance.
Introduction
IN1 International Financial Reporting Standard 5 Non-current Assets Held for Sale and
Discontinued Operations (IFRS 5) sets out requirements for the classification,
measurement and presentation of non-current assets held for sale and replaces
IAS 35 Discontinuing Operations.
IN2 Achieving convergence of accounting standards around the world is one of the
prime objectives of the International Accounting Standards Board. In pursuit of
that objective, one of the strategies adopted by the Board has been to enter into
a memorandum of understanding with the Financial Accounting Standards
Board (FASB) in the United States that sets out the two boards’ commitment to
convergence. As a result of that understanding the boards have undertaken a
joint short-term project with the objective of reducing differences between IFRSs
and US GAAP that are capable of resolution in a relatively short time and can be
addressed outside major projects.
IN3 One aspect of that project involves the two boards considering each other’s
recent standards with a view to adopting high quality accounting solutions. The
IFRS arises from the IASB’s consideration of FASB Statement No. 144 Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS 144), issued in 2001.
IN4 SFAS 144 addresses three areas: (i) the impairment of long-lived assets to be held
and used, (ii) the classification, measurement and presentation of assets held for
sale and (iii) the classification and presentation of discontinued operations.
The impairment of long-lived assets to be held and used is an area in which there
are extensive differences between IFRSs and US GAAP. However, those
differences were not thought to be capable of resolution in a relatively short
time. Convergence on the other two areas was thought to be worth pursuing
within the context of the short-term project.
IN5 The IFRS achieves substantial convergence with the requirements of SFAS 144
relating to assets held for sale, the timing of the classification of operations as
discontinued and the presentation of such operations.
(c) specifies that assets or disposal groups that are classified as held for sale
are carried at the lower of carrying amount and fair value less costs to
sell.
(d) specifies that an asset classified as held for sale, or included within a
disposal group that is classified as held for sale, is not depreciated.
(e) specifies that an asset classified as held for sale, and the assets and
liabilities included within a disposal group classified as held for sale, are
presented separately in the statement of financial position.
(f) withdraws IAS 35 Discontinuing Operations and replaces it with
requirements that:
(i) change the timing of the classification of an operation as
discontinued. IAS 35 classified an operation as discontinuing at
the earlier of (a) the entity entering into a binding sale agreement
and (b) the board of directors approving and announcing a
formal disposal plan. The IFRS classifies an operation as
discontinued at the date the operation meets the criteria to be
classified as held for sale or when the entity has disposed of the
operation.
(ii) specify that the results of discontinued operations are to be
shown separately in the statement of comprehensive income.
(iii) prohibit retroactive classification of an operation as
discontinued, when the criteria for that classification are not met
until after the reporting period.
Objective
1 The objective of this IFRS is to specify the accounting for assets held for sale, and
the presentation and disclosure of discontinued operations. In particular, the IFRS
requires:
(a) assets that meet 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 depreciation on such assets to cease; and
(b) assets that meet the criteria to be classified as held for sale to be
presented separately in the statement of financial position and the
results of discontinued operations to be presented separately in the
statement of comprehensive income.
Scope
1 For assets classified according to a liquidity presentation, non-current assets are assets that include
amounts expected to be recovered more than twelve months after the reporting period.
Paragraph 3 applies to the classification of such assets.
2 However, once the cash flows from an asset or group of assets are expected to arise principally from
sale rather than continuing use, they become less dependent on cash flows arising from other
assets, and a disposal group that was part of a cash-generating unit becomes a separate
cash-generating unit.
as a whole, so that the group is measured at the lower of its carrying amount
and fair value less costs to sell. The requirements for measuring the individual
assets and liabilities within the disposal group are set out in paragraphs 18, 19
and 23.
5 The measurement provisions of this IFRS do not apply to the following assets,
which are covered by the IFRSs listed, either as individual assets or as part of a
disposal group:
5B This IFRS specifies the disclosures required in respect of non-current assets (or
disposal groups) classified as held for sale or discontinued operations.
Disclosures in other IFRSs do not apply to such assets (or disposal groups) unless
those IFRSs require:
6 An entity shall classify a non-current asset (or disposal group) as held for
sale if its carrying amount will be recovered principally through a sale
transaction rather than through continuing use.
7 For this to be the case, the asset (or disposal group) must be available for
immediate sale in its present condition subject only to terms that are usual and
customary for sales of such assets (or disposal groups) and its sale must be highly
probable.
8 For the sale to be highly probable, the appropriate level of management must be
committed to a plan to sell the asset (or disposal group), and an active
programme to locate a buyer and complete the plan must have been initiated.
Further, the asset (or disposal group) must be actively marketed for sale at a
price that is reasonable in relation to its current fair value. In addition, the sale
should be expected to qualify for recognition as a completed sale within one
year from the date of classification, except as permitted by paragraph 9, and
actions required to complete the plan should indicate that it is unlikely that
significant changes to the plan will be made or that the plan will be withdrawn.
The probability of shareholders’ approval (if required in the jurisdiction) should
be considered as part of the assessment of whether the sale is highly probable.
9 Events or circumstances may extend the period to complete the sale beyond one
year. An extension of the period required to complete a sale does not preclude
an asset (or disposal group) from being classified as held for sale if the delay is
caused by events or circumstances beyond the entity’s control and there is
sufficient evidence that the entity remains committed to its plan to sell the asset
(or disposal group). This will be the case when the criteria in Appendix B are
met.
11 When an entity acquires a non-current asset (or disposal group) exclusively with
a view to its subsequent disposal, it shall classify the non-current asset (or
disposal group) as held for sale at the acquisition date only if the one-year
requirement in paragraph 8 is met (except as permitted by paragraph 9) and it is
highly probable that any other criteria in paragraphs 7 and 8 that are not met at
that date will be met within a short period following the acquisition (usually
within three months).
12 If the criteria in paragraphs 7 and 8 are met after the reporting period, an entity
shall not classify a non-current asset (or disposal group) as held for sale in those
financial statements when issued. However, when those criteria are met after
the reporting period but before the authorisation of the financial statements for
issue, the entity shall disclose the information specified in paragraph 41(a), (b)
and (d) in the notes.
12A A non-current asset (or disposal group) is classified as held for distribution to
owners when the entity is committed to distribute the asset (or disposal group)
to the owners. For this to be the case, the assets must be available for immediate
14 An entity shall not account for a non-current asset that has been temporarily
taken out of use as if it had been abandoned.
15A An entity shall measure a non-current asset (or disposal group) classified
as held for distribution to owners at the lower of its carrying amount and
fair value less costs to distribute.3
16 If a newly acquired asset (or disposal group) meets the criteria to be classified as
held for sale (see paragraph 11), applying paragraph 15 will result in the asset (or
disposal group) being measured on initial recognition at the lower of its carrying
amount had it not been so classified (for example, cost) and fair value less costs
to sell. Hence, if the asset (or disposal group) is acquired as part of a business
combination, it shall be measured at fair value less costs to sell.
17 When the sale is expected to occur beyond one year, the entity shall measure the
costs to sell at their present value. Any increase in the present value of the costs
to sell that arises from the passage of time shall be presented in profit or loss as
a financing cost.
3 Costs to distribute are the incremental costs directly attributable to the distribution, excluding
finance costs and income tax expense.
18 Immediately before the initial classification of the asset (or disposal group) as
held for sale, the carrying amounts of the asset (or all the assets and liabilities in
the group) shall be measured in accordance with applicable IFRSs.
21 An entity shall recognise a gain for any subsequent increase in fair value less
costs to sell of an asset, but not in excess of the cumulative impairment loss that
has been recognised either in accordance with this IFRS or previously in
accordance with IAS 36 Impairment of Assets.
22 An entity shall recognise a gain for any subsequent increase in fair value less
costs to sell of a disposal group:
(a) to the extent that it has not been recognised in accordance with
paragraph 19; but
(b) not in excess of the cumulative impairment loss that has been
recognised, either in accordance with this IFRS or previously in
accordance with IAS 36, on the non-current assets that are within the
scope of the measurement requirements of this IFRS.
23 The impairment loss (or any subsequent gain) recognised for a disposal group
shall reduce (or increase) the carrying amount of the non-current assets in the
group that are within the scope of the measurement requirements of this IFRS,
in the order of allocation set out in paragraphs 104(a) and (b) and 122 of IAS 36
(as revised in 2004).
24 A gain or loss not previously recognised by the date of the sale of a non-current
asset (or disposal group) shall be recognised at the date of derecognition.
Requirements relating to derecognition are set out in:
(a) paragraphs 67–72 of IAS 16 (as revised in 2003) for property, plant and
equipment, and
(b) paragraphs 112–117 of IAS 38 Intangible Assets (as revised in 2004) for
intangible assets.
27 The entity shall measure a non-current asset that ceases to be classified as held
for sale (or ceases to be included in a disposal group classified as held for sale) at
the lower of:
(a) its carrying amount before the asset (or disposal group) was classified as
held for sale, adjusted for any depreciation, amortisation or revaluations
that would have been recognised had the asset (or disposal group) not
been classified as held for sale, and
(b) its recoverable amount at the date of the subsequent decision not to sell.4
28 The entity shall include any required adjustment to the carrying amount of a
non-current asset that ceases to be classified as held for sale in profit or loss5
from continuing operations in the period in which the criteria in
paragraphs 7–9 are no longer met. Financial statements for the periods since
classification as held for sale shall be amended accordingly if the disposal group
or non-current asset that ceases to be classified as held for sale is a subsidiary,
joint operation, joint venture, associate, or a portion of an interest in a joint
venture or an associate. The entity shall present that adjustment in the same
caption in the statement of comprehensive income used to present a gain or
loss, if any, recognised in accordance with paragraph 37.
30 An entity shall present and disclose information that enables users of the
financial statements to evaluate the financial effects of discontinued
operations and disposals of non-current assets (or disposal groups).
4 If the non-current asset is part of a cash-generating unit, its recoverable amount is the carrying
amount that would have been recognised after the allocation of any impairment loss arising on that
cash-generating unit in accordance with IAS 36.
5 Unless the asset is property, plant and equipment or an intangible asset that had been revalued in
accordance with IAS 16 or IAS 38 before classification as held for sale, in which case the adjustment
shall be treated as a revaluation increase or decrease.
(iii) the gain or loss recognised on the measurement to fair value less
costs to sell or on the disposal of the assets or disposal group(s)
constituting the discontinued operation.
(c) the net cash flows attributable to the operating, investing and financing
activities of discontinued operations. These disclosures may be
presented either in the notes or in the financial statements. These
disclosures are not required for disposal groups that are newly acquired
subsidiaries that meet the criteria to be classified as held for sale on
acquisition (see paragraph 11).
(a) the resolution of uncertainties that arise from the terms of the disposal
transaction, such as the resolution of purchase price adjustments and
indemnification issues with the purchaser.
(b) the resolution of uncertainties that arise from and are directly related to
the operations of the component before its disposal, such as
environmental and product warranty obligations retained by the seller.
(c) the settlement of employee benefit plan obligations, provided that the
settlement is directly related to the disposal transaction.
36 If an entity ceases to classify a component of an entity as held for sale, the results
of operations of the component previously presented in discontinued operations
in accordance with paragraphs 33–35 shall be reclassified and included in
income from continuing operations for all periods presented. The amounts for
prior periods shall be described as having been re-presented.
classified as held for sale shall be presented separately from other liabilities in
the statement of financial position. Those assets and liabilities shall not be
offset and presented as a single amount. The major classes of assets and
liabilities classified as held for sale shall be separately disclosed either in the
statement of financial position or in the notes, except as permitted by
paragraph 39. An entity shall present separately any cumulative income or
expense recognised in other comprehensive income relating to a non-current
asset (or disposal group) classified as held for sale.
39 If the disposal group is a newly acquired subsidiary that meets the criteria to be
classified as held for sale on acquisition (see paragraph 11), disclosure of the
major classes of assets and liabilities is not required.
Additional disclosures
41 An entity shall disclose the following information in the notes in the period in
which a non-current asset (or disposal group) has been either classified as held
for sale or sold:
(b) a description of the facts and circumstances of the sale, or leading to the
expected disposal, and the expected manner and timing of that disposal;
(c) the gain or loss recognised in accordance with paragraphs 20–22 and, if
not separately presented in the statement of comprehensive income, the
caption in the statement of comprehensive income that includes that
gain or loss;
(d) if applicable, the reportable segment in which the non-current asset
(or disposal group) is presented in accordance with IFRS 8 Operating
Segments.
Transitional provisions
43 The IFRS shall be applied prospectively to non-current assets (or disposal groups)
that meet the criteria to be classified as held for sale and operations that meet
the criteria to be classified as discontinued after the effective date of the IFRS.
An entity may apply the requirements of the IFRS to all non-current assets (or
disposal groups) that meet the criteria to be classified as held for sale and
operations that meet the criteria to be classified as discontinued after any date
before the effective date of the IFRS, provided the valuations and other
information needed to apply the IFRS were obtained at the time those criteria
were originally met.
Effective date
44 An entity shall apply this IFRS for annual periods beginning on or after
1 January 2005. Earlier application is encouraged. If an entity applies the IFRS
for a period beginning before 1 January 2005, it shall disclose that fact.
44A IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In
addition it amended paragraphs 3 and 38, and added paragraph 33A. An entity
shall apply those amendments for annual periods beginning on or after
1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier period, the
amendments shall be applied for that earlier period.
44B IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) added
paragraph 33(d). An entity shall apply that amendment for annual periods
beginning on or after 1 July 2009. If an entity applies IAS 27 (amended 2008) for
an earlier period, the amendment shall be applied for that earlier period. The
amendment shall be applied retrospectively.
44C Paragraphs 8A and 36A were added by Improvements to IFRSs issued in May 2008.
An entity shall apply those amendments for annual periods beginning on or
after 1 July 2009. Earlier application is permitted. However, an entity shall not
apply the amendments for annual periods beginning before 1 July 2009 unless it
also applies IAS 27 (as amended in January 2008). If an entity applies the
amendments before 1 July 2009 it shall disclose that fact. An entity shall apply
the amendments prospectively from the date at which it first applied IFRS 5,
subject to the transitional provisions in paragraph 45 of IAS 27 (amended
January 2008).
44D Paragraphs 5A, 12A and 15A were added and paragraph 8 was amended by
IFRIC 17 Distributions of Non-cash Assets to Owners in November 2008. Those
amendments shall be applied prospectively to non-current assets (or disposal
groups) that are classified as held for distribution to owners in annual periods
beginning on or after 1 July 2009. Retrospective application is not permitted.
Earlier application is permitted. If an entity applies the amendments for a
period beginning before 1 July 2009 it shall disclose that fact and also apply
IFRS 3 Business Combinations (as revised in 2008), IAS 27 (as amended in January
2008) and IFRIC 17.
44E Paragraph 5B was added by Improvements to IFRSs issued in April 2009. An entity
shall apply that amendment prospectively for annual periods beginning on or
after 1 January 2010. Earlier application is permitted. If an entity applies the
amendment for an earlier period it shall disclose that fact.
44F [Deleted]
44G IFRS 11 Joint Arrangements, issued in May 2011, amended paragraph 28. An entity
shall apply that amendment when it applies IFRS 11.
44H IFRS 13 Fair Value Measurement, issued in May 2011, amended the definition of fair
value in Appendix A. An entity shall apply that amendment when it applies
IFRS 13.
44I Presentation of Items of Other Comprehensive Income (Amendments to IAS 1), issued in
June 2011, amended paragraph 33A. An entity shall apply that amendment
when it applies IAS 1 as amended in June 2011.
Withdrawal of IAS 35
Appendix A
Defined terms
This appendix is an integral part of the IFRS.
cash-generating unit The smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from
other assets or groups of assets.
component of an Operations and cash flows that can be clearly distinguished,
entity operationally and for financial reporting purposes, from the rest
of the entity.
costs to sell The incremental costs directly attributable to the disposal of an
asset (or disposal group), excluding finance costs and income
tax expense.
current asset An entity shall classify an asset as current when:
value in use The present value of estimated future cash flows expected to arise
from the continuing use of an asset and from its disposal at the
end of its useful life.
Appendix B
Application supplement
This appendix is an integral part of the IFRS.
(c) during the initial one-year period, circumstances arise that were
previously considered unlikely and, as a result, a non-current asset (or
disposal group) previously classified as held for sale is not sold by the end
of that period, and:
(i) during the initial one-year period the entity took action necessary
to respond to the change in circumstances,
(ii) the non-current asset (or disposal group) is being actively
marketed at a price that is reasonable, given the change in
circumstances, and
Appendix C
Amendments to other IFRSs
The amendments in this appendix shall be applied for annual periods beginning on or after
1 January 2005. If an entity adopts this IFRS for an earlier period, these amendments shall be
applied for that earlier period.
*****
The amendments contained in this appendix when this IFRS was issued in 2004 have been incorporated
into the relevant IFRSs published in this volume.