Non-current assets

IFRS 5 Non-current Assets Held for Sale

and Discontinued Operations
By. Vicky Xu
Non-current asset held for sale

A non-current asset or disposal group should be classified as ‘held

for sale’ if carrying amount will be recovered primarily through a
sale transaction rather than through continuing use.

A disposal group is a group of assets (and possibly liabilities) that

the entity intends to dispose of in a single transaction.
Classification criteria

1) The asset (or disposal group) is available for immediate sale in

its present condition;
2) Management is committed to a plan to sell the asset;
3) An active programme to locate a buyer is initiated;
4) Asset must be actively marketed for a sale at a reasonable price
in relation to its current fair value;
5) The sale is highly probable, within one year from classification;
6) 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that the plan will be withdrawn.
 Measurement
• Immediately prior to classification as held for sale, carrying amount
of the asset is measured in accordance with applicable IFRSs;
• After classification, it is measured at the lower of carrying amount
and fair value less costs to sell;
• Impairment must be considered at the time of classification as held
for sale and subsequently;
• Subsequent increases in fair value cannot be recognised in profit or
loss in excess of the cumulative impairment losses that have been
recognised with this IFRS or with IAS 36 Impairment of Assets;
• Non-current assets (or disposal groups) classified as held for sale are
not depreciated.
Measurement
2014/12 Joey (30/11/2014)

At 30 November 2013, Joey carried a property in its statement of

financial position at its revalued amount of $14 million in
accordance with IAS 16 Property, Plant and Equipment.
Depreciation is charged at $300,000 per year on the straight line
basis. In March 2014, the management decided to sell the property
and it was advertised for sale. By 31 March 2014, the sale was
considered to be highly probable and the criteria for IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations were met
at this date.
2014/12 Joey (30/11/2014)

At that date, the asset’s fair value was $15·4 million and its value in
use was $15·8 million. Costs to sell the asset were estimated at
$300,000. On 30 November 2014, the property was sold for $15·6
million. The transactions regarding the property are deemed to
be material and no entries have been made in the financial
statements regarding this property since 30 November 2013 as the
cash receipts from the sale were not received until December 2014.
2014/12 Joey (30/11/2014)
30/11/2013 14
Depreciation (0.1) 0.3 * 4/12
31/3/2014 13.9
Revaluation gain 1.5
Revalued amount @31/3/2014 15.4

Revaluation Reclassification
Dr PPE 1.5 Revalued CV=15.4
Cr OCI 1.5 FV-CTS=15.4-0.3=15.1; VIU=15.8 (Irrelevant)

Sold Dr NCAHFS 15.1

TR=15.6-0.3=15.3 Dr P/L 0.3
Cr PPE 15.4
Dr TR 15.3
Dr P/L 0.2
Cr NCAHFS 15.1
 Disclosure
• Non-current assets (or a disposal group) held for sale are disclosed
separately from other assets in the statement of financial position. If
there are any liabilities, these are disclosed separately from other
liabilities
• Description of the nature of assets (or disposal group) held for sale
and facts and circumstances surrounding the sale
• A gain or loss resulting from the initial or subsequent fair value
measurement of the disposable group or non-current asset held for
sale if not presented separately in the statement of comprehensive
income and the line item that includes that gain or loss
Disclosure
• Prior year balances in the statement of financial positions are not
reclassified as held for sale
• If applicable, the reportable segment (IFRS 8) in which the non-
current asset or disposable group is presented.
Discontinued operation

A component of an entity that either has been disposed of or is

classified as held for sale and either:
• Represents a separate major line of business or geographical
area of operations;
• Is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations;
• Is a subsidiary acquired exclusively with a view to resale.
 Classification and presentation

• Classification as a discontinued operation depends on when the

operation also meets the requirements to be classified as held for
sale
• Results of discontinued operations are presented as a single
amount in the statement of comprehensive income. An analysis
of the single amount is presented in the notes or in the statement
of comprehensive income
• Cash flow disclosure is required – either in the notes or
statement of cash flows
2018/12 Q1c Moyes (30/9/2018)

During the year ended 30 September 20X8, Moyes sold all of its
equity interests in Barham for cash. 80% of the equity shares of
Barham had been acquired several years ago but Moyes had decided
to sell as the performance of Barham had been poor for a number of
years. The directors of Moyes wish advice as to whether the
disposal of Barham should be treated as a discontinued operation
and separately disclosed within the consolidated statement of profit
or loss. There are several other subsidiaries which all produce
similar products to Barham and operate in a similar geographical
area.
2018/12 Q1c Moyes (30/9/2018)

Additionally, Moyes holds a 52% equity interest in Watson. Watson

has previously issued share options to other entities which are
exercisable in the year ending 30 September 20X9. It is highly
likely that these options would be exercised which would reduce
Moyes’ interest to 35%. The directors of Moyes require advice as to
whether this loss of control would require Watson to be classified as
held for sale and reclassified as discontinued.
2018/12 Q1c Moyes (30/9/2018)

Required:
Advise the directors as to whether Watson should be classified as
held for sale and whether both it and Barham should be classified as
discontinued operations. (6 marks)

Watson → NCAHFS? → yes

Watson → DO? → not sure
Barham → DO? → no
2018/12 Q1c Moyes (30/9/2018)
Suggested answer:
[终止经营的定义] Discontinued operation is a component of an entity
which either has been disposed of or is classified as held for sale, and (i)
represents a separate major line of business or geographical area of
operations; (ii) is a single co-ordinated plan to dispose of a separate
major line or area of operations; (iii) is a subsidiary acquired exclusively
for resale.

[Barham & Watson 都 是 集 团 的 一 部 分 ， 满 足 了 基 本 条 件 ] Both

entities would be components of the Moyes group since their operations
and cash flows are clearly distinguishable for reporting purposes.
2018/12 Q1c Moyes (30/9/2018)

[Barham不是独立的主要业务或单独的主要经营地区，但也涉
及管理层的专业判断] Barham has been sold during the year but
there appears to be other subsidiaries which operate in similar
geographical regions and produce similar products. Little guidance
is given as to what would constitute a separate major line of
business or geographical area of operations. The definition is
subjective and the directors should consider factors such as
materiality and relevance before determining whether Barham
should be presented as discontinued or not.
2018/12 Q1c Moyes (30/9/2018)
[持有待售的定义] To be classified as held for sale, a sale has to be
highly probable and the entity should be available for sale.

[Watson看起来不满足，因为没有卖，但准则说失去控制权时，资
产和负债结转到持有待售] At face value, Watson would not appear to
meet this definition as no sales transaction is to take place. IFRS 5 does
not extend the requirements for held for sale to situations where control
is lost. However, the IASB have confirmed that in instances where
control is lost, the subsidiaries’ assets and liabilities should be
derecognised. Therefore, situations where the parent is committed to lose
control should trigger a reclassification as held for sale.
2018/12 Q1c Moyes (30/9/2018)

[Watson是否构成DO？信息不足] It is possible therefore that

Watson should be classified as held for sale but to be classified as a
discontinued operation, Watson would need to represent a separate
major line of business or geographical area of operation.
2020/12 Q3biii Corbel (31/12/20X7)

Corbel Co trades in the perfume sector. It has recently acquired a

company for its brand ‘Jengi’, purchased two additional brand
names, and has announced plans to close its Italian stores. Corbel
Co also opened a new store on a prime site in Paris.

Plan to close and sell stores

Corbel Co approved and announced a plan to close and sell all six
Italian stores on 31 December 20X7. The six stores will close after
a liquidation sale which will last for three months.
2020/12 Q3biii Corbel (31/12/20X7)

Management has committed to a formal plan for the closure of the

six stores and has also started an active search for a single buyer for
their assets. The stores are being closed because of the increased
demand generated by Corbel Co’s internet sales.

A local newspaper has written an article suggesting that up to 30

stores may be closed with a loss of 500 jobs across the world, over
the next five years. The directors of Corbel have denied that this is
the case.
2020/12 Q3biii Corbel (31/12/20X7)

Required:
How to account for the proposed closure of the six stores and the
suggested closure of the remaining stores? (6 marks)
2020/12 Q3biii Corbel (31/12/20X7)

Suggested answer:
The six stores should be accounted for as a discontinued operation
as they represent a component of Corbel Co and are a separate
geographical area of operations. In addition, the six stores would be
classified as a ‘disposal group’ which is a group of assets that, an
entity intends to dispose of in a single transaction.

The approval and announcement of a plan to close the six Italian

stores is an indication that the assets attributable to the
discontinuing operation may be impaired.
2020/12 Q3biii Corbel (31/12/20X7)
Additionally, there may be a need to provide for the additional costs of
closure such as redundancy costs under IAS 37.

Although there has been a local newspaper article that Corbel Co is to

shut 30 stores with a loss of 500 jobs across the world over the next five
years, there has been no formal announcement by Corbel Co and
therefore, no provisions should be. It is feasible that the closure of the
additional 24 stores will not take place, and there is no constructive
obligation unless there is at least a detailed formal plan. The directors
have denied the fact that the additional stores will be closed.
Thank You
感谢您选择高顿网校 本节结束！