IND AS 105

105: Non-current Asset classified as Held for sale &

Discontinued Business / Operation
1. Non-current Asset classified as “Held for Sale”
 Classification
 Measurement
 Presentation
 Disclosures.

2. Discontinued Operation.
 Presentation
 Disclosure

N.C.A classified as Held for Sale

A. Classification
N.C.A can be either Individual Asset or group of Assets [Disposal Group] N.C.A. is classified as
Held for Sale or Distribution when it’s carrying Amount is to be recovered from sale rather than
use. N.C.A. can be either Held for sale or Held for Distribution.

Held for Sale:

Conditions:
(i) N.C.A. is available for immediate sale in Present condition. [Subject to terms which are usual &
customary in nature].
(ii) Sale is highly probable.
 Appropriate level of Management is committed to plan of sale,
 Active program to locate buyer has been initiated,
 Asset is actively marketed for sale at the price reasonable in relation to current Fair value,
 Sale is expected to get completed within 1 year from the date of classification AND
 It is unlikely that there will be change or withdrawal of plan.

Extension is allowed if.....

1. Delay is beyond the control of entity
And
2. Sufficient evidences are available that entity is committed to their plan.

Held for Distribution

(i) N.C.A. is available for immediate distribution in its Present condition.
(ii) Distribution is highly probable.

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  Action to complete distribution has been initiated.
 Distribution will be completed within 1 year of classification.
 No change or withdrawal of plan is expected.

Abandonment of Asset:
N.C.A can be either held for sale or distribution but abandonment does not indicate that asset is held
for sale.
N.C.A or Disposal group used by the entity till the end of its economic life are called abandoned Asset.
They are to be closed rather than sold.
Temporary non usage of Asset – Abandonment
Suspension

Disposal Group:
Group of Asset to be disposed of in a single transaction which includes N.C.A., C.A., N.C.L, C.L. is
called disposal group.
If abandoned disposal group fulfils criteria’s of discontinued operation than it will be classified
discontinued operation.

If any N.C.A. is held for sale after balance sheet date and before approval of financial statement, it will
be regarded as Non-adjusting Event as per Ind AS: 10 So, only disclosures will be made for such
event.

B. Measurement
1. Individual Measurement
(i) Before Date of classification:
 Calculate carrying Amount as per Ind AS 16/ 40/ 38.
 Provide depreciation/ Amortisation till date of classification
 Compare it with Recoverable Amount
 Provide Impairment losses [Ind AS 36]

(ii) On the Date of Classification

 Compare carrying amount derived in point (i) with fair value less Cost to sale
 N.C.A. will be measured at lower of the above.
 Provide for losses if any.
 Gain will not be recognised.

Note: Stop charging Depreciation / Amortization from classification date.

In case, sale is expected after 1 year than P.V. of Cost to sale will be deducted from Fair Value.

2. Subsequent Measurement
(iii) On 1st Balance sheet date
 Compare carrying amount of point (ii) with fair value less cost to sale.
 If loss: charge it to P & L A/c

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  If Gain: It can be recognised not more than cumulative Impairment losses till date.

(iv) On 2nd Balance sheet date [If any]

 Only when there is delay or extension of time
(a) If extension is valid: Give same treatment as Point (iii)
(b) If extension is not valid: It will be treated as change in plan.

(v) Derecognising:
 Compare carrying amount with sales proceeds and recognise profit/ loss on sale.

Sum:
X Ltd decided to classify a machine as Held for sale from 28th Feb, 2018. C.A. of machine as on 1st
April, 2017 is Rs.10,00,000. Rate of Depreciation is 12% value in use before date of classification was
` 8,50,000. Following are the fair values on different dates.
`
Before date of classification - 8,60,000
th
28 Feb, 2018 - 8,40,000
st
31 March, 2018 - 8,55,000
st
31 March, 2019 - 8,20,000

Asset were actually sold on 8th May, 2019 for ` 8,70,000. Give treatment as per Ind AS: 105,
If - extension was beyond control of the entity
- extension was due to delay by entity..

Disposal Group:
Initial Measurement:
Scoped In: Assets governed by Ind AS 16,38,40.
Scoped Out: Current Asset
Current Liability
Non-current liability
Deffered Tax Asset (12)
Financial Asset (32,107,109)
Biological Asset which are measured at Fair Value (41)
Assets arising out of employee Benefits (19)

(i) Before Date of classification

 Calculate C.A. of Disposal Group without considering Scoped in scoped out items.

(ii) On the date of classification

 Segregate C.A. between scoped in/ scoped out items.
 Segregate Fair value less cost to sale between scoped out and scoped in items.

Scoped out items – Fair value based on respective Ind As.

Scoped in items – Fair Value of whole disposal group
Less Fair value of scoped out items.

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 Provide Impairment Losses, if any
 Impairment loss will be written off against.......
1. Goodwill
2. Scoped in items in the ratio of their C.A. carrying amount.
 Don’t recognise profit.

Subsequent Measurement: [only scoped in items]

(iii) On 1st Balance sheet date:
 Compare carrying amount fair value les cost to sale.
If loss: take it to P & L A/c
If Profit: Reversal of losses is allowed as per Ind AS: 36
 Reversal of Impairment loss is not allowed on Goodwill as it will lead to recognition of Internally
Generated Goodwill which is prohibited by Ind AS 38.
 Reversal of Impairment losses is allowed only upto losses previously recognised & Criteria of Ind
AS: 36 must get fulfilled.

Example:
X Ltd. decided to classify a disposal group as held for sale. B/s is as under: Date of classification is
30/6/18
Balance sheet Before Date of classify
1/4/18 31/5/18 Re-measured C.A.
Goodwill 100 100
Machinery 1500 1450
Building 2000 1800
Inventory 150 150
Debtor 200 180
Financial Asset 250 240
Non current Liability 2000 2000
Current Liability 200 180
Net Asset 2000 1740

Fair value Less Cost to sale of overall disposal group is ` 1600. Provide necessary treatments as per
Ind AS 105

Change in Plan of sale:

When parameters or condition for classification of N.C.A. or D.G. as held for sale which were met
earlier and now failed will be treated as change in plan. Record N.C.A / D.G. at lower of following.
(i) Carrying amount that would have been, had there been no classification as held for sale.
C.A as per step (i) of Initial Measurement Less Depreciation / Amortized from the date of
classification till change in plan.
OR
(ii) Recoverable Amount on the date of change in plan

Any Adjustment in C.A. will be taken to P & L A/c [Gain/Loss].

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C. Presentation
B/S
Equity *** NCA ***
R/S *** CA ***
Other Equity *** NCA/ DG held for Sale ***
Reserves directly attributable to ***
NCA / DG classified as held for
sale
NCL ***
CL ***
Liability directly attribute to ***
NCA/ DG classified as held for
sale

D. Disclosures
 Description of NCA or D.G.
 Description of facts & circumstances of sale which may lead to expected disposal.
 Expected manner & timing of disposal.
 Gain/Loss recognised in step (ii), (iii), (iv)
 Change in plan, if any

Time of 3 months:
When an entity acquires any N.C.A or disposal group exclusively for the purpose of subsequent sale
than such N.C.A or disposal group will be classified as Held for sale at the Acquisition Date. However
It Asset is not ready for immediate Sale, a short period of 3 months will be given to meet other
classification criteria.
[3 months are included in period of 1 year]

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 Discontinued Operation
A component of any entity i.e. either disposed off or classified as “Held for Sale” and satisfied
any of the 3 conditions.
1. Components represents separate major line of Business / Geographical location
2. It is a part of single co-ordinated plan to dispose of separate major line of Business/
Geographical location.
3. It is a Subsidiary acquired exclusively for resale.

Major Line of Business:

A component which is financially or operationally separable from other components of the entity

Presentation:
Profit / Loss from Such segment should be separately disclosed on the face of P & L A/c [Profit before
Tax, Tax amount, Profit after Tax]
 Profit / Loss on disposal should be separately disclosed which may arise due to classification for
“held for sale”.
 Analysis of Profits will be given in “notes to A/c”
 To enable users or owners to distinguee between cash flow from continued

Disclosures:
1. Necessary Disclosure in cash flow statement will be made Adjustment relating to prior period for
discontinued operation shall be disclosed [Nature & Amount]
E.g. Purchase Price Adjustment
Warrantee Obligation
Employee Benefits obligation of discontinued operation.
2. Post Tax P & L of discontinued operation
Post Tax gain/loss recognised on measurement to Fair Value Less cost to sell or on disposal of
Asset or disposal group constituting discontinued operation

Change in plan:
 Reclassify discontinued operation as continued operation.
 Include its income in the income of continued operation.

Difference Ind As 105 As 24

Scope - N.C.A held for sale - Discontinuing operation
- Discontinued operation
Time Period of 1 year with Guidance given No guidance
extension
Abandonment of Asset Guidance given No guidance
Accounting for change in plan Guidance given No guidance

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