CHAPTER 6: NONCURRENT ASSET HELD FOR SALE

 Noncurrent Asset
o Asset that does not meet the definition of a current asset
o May be an individual asset like land and building, or a disposal group
o 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
 Noncurrent Asset held for Sale
o PFRS 5, oaragraph 6
 Noncurrent asset/disposal group is classified as held for sale
 If the CA will be recovered through a sale transaction rather than
through continuing use
 Entity does not intend to use the asset as part of the ongoing business
but intends to sell it and recover the CA principally through sale
 Conditions for classification as held for sale
1. Asset or disposal group is available for immediate sale in the present condition
- Subject only to terms that are usual and customary for sale of such
assets/disposal group
- Current condition of asset
o Adequate to be effectively “sold as seen”
2. Sale must be highly probable.

DEFINITION OF HIGH PROBABLE

1. Management must be committed to a plan to sell the asset/disposal group.

2. An active program to locate a buyer and complete the plan must have been initiated.
3. Sale is expected to be a completed sale w/in one year from the date of classification as held for
sale.
 Extension of one-year period
o Does not preclude the asset or disposal group from being classified as held for sale if the
delay is caused by events/circumstances beyond the entity’s control
4. Asset/disposal group must be actively marketed for sale at a sale price that is reasonable in
relation to the fair value
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changed or withdrawn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, paragraph 15
o Entity shall measure a noncurrent asset/disposal group classified as held for sale
 At the lower of CA or fair value less cost of disposal
 PFRS 5, paragraph 25
o Noncurrent asset classified as held for sale
 Shall not be depreciated
WRITEDOWN TO FAIR VALUE LESS COST OF DISPOSAL

 If the fair value less cost of disposal < CA of the asset or disposal group
o Writedown to fair value less cost of disposal – impairment loss
 If the noncurrent asset is a disposal group
o Impairment loss is apportioned across the assets based on carrying amount after writing
off any goodwill first

SUBSEQUENT INCREASE IN FAIR VALUE

 If subsequently there is an increase in fair value less cost of disposal

o PFRS 5, paragraph 21
 Entity shall recognize a gain but not in excess of any impairment loss previously
recognized

REVALUED ASSET CLASSIFIED AS HELD FOR SALE

 PFRS 5, paragraph 18
o 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
o Equal to the fair value at the classification date less the CA at that date
 Any cost of disposal at classification date
o Should be recognized as impairment loss for the period and deducted from the asset
held for sale
o However at subsequent year-end
 Revalued asset classified as held for sale shall be measured at the lower of
carrying amount and FV less cost of disposal

ABANDONED NONCURRENT ASSET

 PFRS 5, paragraph 13
o Entity shall not classify as held for sale a noncurrent asset or disposal group that is to be
abandoned
o CA will be recovered principally through the continuing use or the noncurrent asset is to
be used until the end of its economic life

TEMPORARILY ABANDONED

 PFRS 5, paragraph 14
o Entity shall not account for a noncurrent asset that has been temporarily taken out of
use as if it had been abandoned
 Ex. An entity ceases to use a manufacturing plant because demand for its
product has declined.
o However the plant is not regarded as abandoned.
 Plant is maintained in workable condition and it is expected that it will be
brought back into use if demand picks up.
CHANGE IN CLASSIFICATION

 Ex. There is a decision not to sell the noncurrent asset or the criteria for being classified as held
for sale may no longer be met.
 PFRS 5, par. 27
o Entity shall measure the NCA that ceases to be classified as held for sale at the lower of:
 CA before the asset was classified as held for sale adjusted for any depreciation,
amortization or revaluation that would have been recognized if the asset had
not been classified as held for sale
 Recoverable amount at the date of the subsequent decision not to sell
 PFRS 5, par, 28
o Any adjustment to CA of a NCA that ceases to be classified as held for sale should be
included in profit or loss
o If NCA is measured using the revaluation model before it was classified as held for sale
 Any adjustment shall be treated as revaluation increase or decrease

PRESENTATION OF ASSET CLASSIFIED AS HELD FOR SALE

 PFRS 5, par. 3
o Assets classified as noncurrent in accordance with PAS 1
 Shall not be reclassified as current assets until they meet the criteria to be
classified as held for sale
o Noncurrent asset that is already classified as held for sale
 Shall be presented separately as current asset
 PFRS 5, par. 38
o If the noncurrent asset 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
 Asset of the disposal group – noncurrent assets classified as held for sale
 Presented separately as a single amount under current assets
 Liabilities of the disposal group – liabilities directly associated with noncurrent
assets classified as held for sale
 Presented separately as a single amount under current liabs

CHANGE IN METHOD OF DISPOSAL

A. The change in classification – continuation of the original plan of disposal

B. Entity shall continue to apply the “held for sale” or “held for distribution” accounting.
- Asset shall be measured at the lower between the CA and the FV less cost of
disposal or FV less cost to distribute
C. At the time of reclassification
- Entity shall recognize any impairment loss/subsequent increase in FV less cost of
disposal/distribution
D. Change in classification does not in itself extend the period in which a sale has to be completed.