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IFRS 5

IFRS 5

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Published by ayazhassan1989
non current asset held for sale
non current asset held for sale

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Published by: ayazhassan1989 on Mar 13, 2013
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03/13/2013

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In this article, Steve Collings looks at how an entity should account for non-cu rrent assets which have

been classified as held for sale. The objective of IFRS 5 is to specify how assets that both qualify for, and are treated as, held for sale should be presented and disclosed within a set of financ ial statements. The standard also deals with discontinued operations. A non-current asset (or disposal group) that is held for sale must be up for sal e in its present condition and the sale must be highly probable. In order for t he sale to be classed as highly probable , there must be certain characteristics pr esent. These are as follows: Management must be committed to a plan to sell the asset. There must be an active programme of seeking a buyer. The asset (or disposal group) must be available for immediate sale. The sale is highly probable. The sale is expected to complete within one year of the asset being classified a s held for sale. Where an asset (or disposal group) is classified as held for sale, then deprecia tion of such an asset or disposal group must cease as soon as it is classified a s held for sale. The asset (or disposal group) should be carried in the stateme nt of financial position (balance sheet) at the lowerof the carrying amount in t he statement of financial position (balance sheet) and fair value less costs to sell. Fair value is essentially how much could be received by knowledgeable and willing persons in exchange for the asset in an arm s length transaction. Discontinued Operations A discontinued operation is a part of an entity that has either been disposed of or is classified as held for sale (e.g. a division of a manufacturing plan). A discontinued operation should: Represent a separate major line of business or geographical area of operations; Be part of a single co-ordinated plan to dispose of a separate major line of bus iness or geographical area of operation; or Be a subsidiary acquired exclusively with a view to resale. Where an entity has a discontinued operation, that component of the entity s opera tions and cash flows must be clearly distinguished both operationally and for fi nancial reporting purposes from the rest of the entity. For financial reporting purposes, the revenue, expenses, pre-tax profit or loss and the income tax expense of the discontinued operation should be separately pr esented on the face of the statement of comprehensive income (income statement) or in the notes to the financial statements.

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