NONCURRENT ASSET HELD FOR SALE

 Noncurrent asset may be an individual asset, like land and building, or a disposal group
 Disposal group – group of assets to be disposed of, by sale or otherwise, together as a group in a
single transaction, and liabilities directly associated with those assets that will be transferred in the
transaction
o Includes goodwill acquired in a business combination if the group is a cash generating unit
to which goodwill has been allocated

Noncurrent asset held for sale

 PFRS 5, p. 6: a noncurrent asset or disposal group is classified as held for sale if the carrying amount
will be recovered principally through a sale transaction rather than through continuing use

Conditions for classification as held for sale

1. Asset or disposal group is available for immediate sale in the present condition (“sold as seen”)
2. Sale must be highly probable

Definition of highly probable

1. Management must be committed to a plant to sell the asset or disposal group
2. Initiate active program to locate a buyer and complete the plan
3. Expected to be a “completed sale” within one year from date of classification as held for sale
4. Asset or disposal group must be actively marketed at a reasonable sale price in relation to FV
5. Actions required to complete the plan indicate that it is unlikely that the plan will be significantly
changed or withdrawn

Measurement of asset held for sale

 PFRS 5, p. 15: measure NCAHS at the LOWER of carrying amount or fair value less cost of disposal
o Cost of disposal – excludes finance cost and income tax expense
o Shall not be depreciated

Write-down to fair value less cost of disposal

 If FVLCD < CA  write-down is treated as impairment loss
 If the NCA is a disposal group, the impairment loss is apportioned across the assets
o Priority: goodwill (full)
o Excess: allocate prorate to NCA based on CARRYING AMOUNT

Subsequent increase in fair value

 PFRS 5, p. 21: if there is a subsequent increase in FVLCD, an entity shall recognize a gain but not in
excess of any impairment loss previously recognized

Revalued asset classified as held for sale

 PFRS 5, p. 18: when an entity adopts the revaluation model for the measurement of assets, any asset
classified as held for sale should be revalued to fair value immediately prior to the classification as
held for sale
 Additional revaluation surplus = fair value at classification date – carrying amount at that date
 Any cost of disposal at classification date = impairment loss for the period (deducted from the asset
held for sale)
 Subsequent year-end measurement: lower of carrying amount and fair value less cost of disposal
Abandoned noncurrent asset
 PFRS 5, p. 13: an entity shall not classify as held for sale a noncurrent asset or disposal group that is
to be abandoned
 Carrying amount will be recovered principally through continuing use or the noncurrent asset it to
be used until the end of its economic life

Temporarily abandoned
 PFRS 5, p.14: shall not account for a NCA that has been temporarily abandoned taken out of use as if
it had been abandoned

Change in classification
 Circumstances could arise leading to the NCA no longer classified as held for sale
 PFRS 5, p. 27: the entity shall measure the NCA that ceases to be classified as held for sale at the
LOWER of:
o Carrying amount before asset was classified as held for sale adjusted for any depreciation or
amortization that would have been recognized if asset had not been classified as held for sale
o Recoverable amount at the date of the subsequent decision not to sell

Presentation of asset classified as held for sale

 PFRS 5, p. 3: assets classified as NC in accordance with PAS 1 shall not be reclassified as CA until they
meet the criteria to be classified as held for sale
 PFRS 5, p. 38: if the NCA is a disposal group classified as held for sale, assets and liabilities of the
group shall be presented separately and cannot be offset as a single amount
o “noncurrent assets classified as held for sale”
o “liabilities directly associated with noncurrent assets classified as held for sale”

Change in method of disposal

 IASB amended IFRS 5 to clarify the accounting treatment when an entity reclassifies an asset or
disposal group from “held for sale” to “held for distribution to owners” or vice versa without any time
lag
o The change in classification is considered a continuation of the original plan of disposal
o Entity shall continue to apply the “held for sale” or “held for distribution” accounting (FVLCD
vs CA, lower)
o At the time of reclassification, the entity shall recognize any impairment loss or subsequent
increase in FV less cost of disposal or distribution
o Change in classification does not, in itself, extent the period in which a sale has to be
completed
Method Initial Subsequent Initial Subsequent Reclassification
measurement as measurement as measurement as measurement as back to PPE
PPE PPE reclassified NCAHS reclassified NCAHS
COST acquisition cost carrying amount LOWER of CA and LOWER of CA and LOWER of:
(depreciated value) FVLCD FVLCD CA had there been
no reclassification

and

Recoverable amount
REVALUATION acquisition cost revalued amount FVLCD LOWER of CA and LOWER of:
FVLCD CA had there been
update to FV before no reclassification
reclassifying
CD = imp loss and

Recoverable amount