IND AS 105 : NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

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IND AS 105 : NON-CURRENT ASSETS HELD FOR SALE
AND DISCONTINUED OPERATION

(I) Key Terms

(1) Non-Current Assets
These are assets other than current assets i.e. Usually assets having a life
of more than 12 months.
(2) Disposal Group
Refers to group of assets / Liabilities intended to be sold through a single
transaction.
Example: 1 classroom out of 10
Clarification: Current asset and any liability can also be a part of disposal
group if management also intends to sell them. However, impairment /
write off, provisions of IND AS 105, will not apply to these Current Assets &
Liabilities (similar to CGU).
(3) Discontinued Operation
Represents a component of the entity which has been disposed / discontinued
or is classified as held for sale. A discontinued operation usually represents
a separate major line of business or geography.
Example: 10 classrooms out of 10 classrooms intended to be sold

DISCONTINED OPERATION

Component

Discontinued
Disposed OR OR Held for sale
[Abandoned /
[Sold] [Not yet sold]
cessation]
(Past event) (future event)
(Past event)

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IND AS 105 : NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

(II) Scope

(a) Inventory (Current)

(b) Financial Assets (IND AS 109)

IND 105 does

not cover: (c) Biological Assets (IND AS 41)

(d) Deferred Tax Assets (IND AS 12)

(e) Any type of Liabilities (As the IND AS applies to assets)

P.P.E (a)

Intangibles (b)
In short,
Goodwill (c) IND AS 105
applies to:

Investment Property (d)

(Refer Q. 1, 2, 4)

(III) Classification of Non Current Assets / Disposal Group as Held for Sale

CRITERIA FOR CLASSIFICATION

AVAILABLE FOR IMMEDIATE AND SALE IS HIGHLY

SALE IN THE PRESENT
PROBABLE
CONDITION

(1) An asset which is intended to be (1) Appropriate level of management is

renovated cannot be classified
as held for sale till the time
renovation is completed
(2) Assets which remain vital for
the entity’s ongoing operations
cannot be classified as held for
sale E.g.: An asset needed to
complete a backlog of order
(3) Exceptions: Legal / Customary
delays which are usual for the
sale of similar assets can be
ignored.
E.g.: Regulator’s Approval
committed to the sale plan.
E.g.: Board / Shareholder Approval
(2) Active process to find a buyer has
started
E.g.: Broker Appointed or a buyer is
identified
(3) Asset is marketed and continues to
be marketed at a reasonable price
compared to the Fair Value
(4) The sale is expected to be completed
within 1 year from the date of
classification
(5) Withdrawal from sale plan is unlikely.

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IND AS 105 : NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

KEY POINTS
(1) Abandonment / Temporary Retirement:
These are not Sale transaction and an asset held with the intention to abandon
/ temporarily retired is not covered under IND AS 105 and cannot be classified
as held for sale.
(2) Events Occurring during the post Balance Sheet period
The classification under IND AS 105 is based on the satisfaction of conditions
on the Balance Sheet Date. Subsequent compliance / non-compliance cannot
affect the classification on the Balance sheet Date (Non-Adjusting Event)
(3) Stake Sale in case of a Subsidiary
In case the expected stake sale would result in a loss of control, the entire net
assets of the subsidiary will be shown as held for sale in the consolidated accounts.
(4) Exception for 1 year
An item can be continued to be shown as held for sale even after 1 year has
passed if:
(a) The delay is due to factors beyond the entity’s control.
Example: Delay by the regulator and
(b) The management continues to be committed to the sale plan

(Refer Q. 3, 5, 6, 13)

(IV) Accounting Principles

(1) As on the date of classification as held for sale, all applicable IND AS like
IND AS 16 , IND AS 38 , IND AS 36 (Impairment if indicators exist) should
be applied and carrying value should be determined
(2) The non-current asset held for sale should be valued at the lower of:
(a) Carrying Value on the date of classification (After applying all IND AS)

OR

(b) Fair Value – Cost to Sell on the date of classification. In case of a loss,
the difference should be debited to the P&L. ICAI refers to this loss as
impairment loss (under IND AS 105)
(3) Depreciation will stop from the date the asset is classified as held for
sale
Points (2) and (3) are similar to inventory valuation i.e. (Inventory is valued
at the lower of cost or NRV and it does not get depreciated.)
(4) The Non-current asset held for sale should be separately disclosed in the
Balance Sheet as a separate line item.

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IND AS 105 : NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

(V) Change in the Plan to Sell / Asset to Longer Meeting the Held for Sale Criteria
In case an entity subsequently changes its plan to sell or the sale is no longer highly
probable, then the asset should be reclassified to P.P.E at the lower of:
(a) Carrying Value on the date of reclassification assuming the asset was never
classified as held for sale (i.e. after considering depreciation and impairment
under IND AS 36 but not considering impairment under IND AS 105)
(b) Recoverable Value on the date of reclassification
The difference between the ledger balance on the date of reclassification and the above
value should be shown as a gain / loss on reclassification (profit / loss).
Additionally, in case there is an improvement in service potential we should also check
for reversal of impairment loss under IND AS 36. While doing so, we can follow the below
mentioned order for recording:
(i) Gain / Loss on reclassification under IND AS 105
(ii) Reversal under IND AS 36

(Refer Q. 7, 12)

(VI) Disposal Group Held for Sale

The Principles remain the same as impairment loss in a CGU.

Calculate carrying value of all individual assets / Liabilities in the disposal

(1) group as per the respective IND AS (2, 16, 38, 40,109 etc) on the date
of classification as held for sale

(2) Calculate Fair Value less cost to sell of the entire disposal group.

(3) Impairment loss under IND AS 105 equals 1 – 2 (if positive).

Allocation of Loss
(4) (i) Goodwill
(ii) Excess if any, should be allocated to P.P.E, Intangibles,
Investment Property in the ratio of their carrying values. No part
of such a loss can be allocated to other assets and Liabilities (like
inventories, Financial Assets, Loans etc) because these assets /
Liabilities are not covered under IND AS 105

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IND AS 105 : NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

The assessment should again be done at each Balance Sheet Date and if
(5) there is a further reduction in Fair Value less cost to sell, the same steps
as above should be followed.
(No depreciation in subsequent periods for PPE / Intangibles held for
sale as a part of Disposal Group)

(Refer Q. 8, 10)

(VII) Discontinued Operations

A separate disclosure should be given on the face of the INCOME Statement in order
to record profit / losses from Discontinued Operations and their corresponding tax as
separate line items.
The Revenue / Expenses on the face of income statement should be for continuing
operations only. Further, such a split on the face of income statement is not needed for
non current assets or disposal groups held for sale.

(Refer Q. 9, 11)

(VIII) Non-Current assets taken over as a Part of Business Combination

In case acquirer also intends to sell these items, they will be taken over at Fair
value – Cost to sell at the time of business combination.

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