PFRS 5 Non-current assets Held for Sale and

Discontinued Operations
Learning Objectives
• Describe the criteria for held for sale classification.
• State the initial and subsequent measurement of held
for sale assets.
• State the presentation requirements of a discontinued
operation.

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 Core Principle

• A noncurrent asset is presented in the classified

statement of financial position as current asset
only when it qualifies to be classified as “held for
sale” in accordance with PFRS 5.

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 Scope
• PFRS 5 applies to the following non-current
assets:
1. Property, plant and equipment
2. Investment property measured under the Cost model
3. Investments in associate or subsidiary or joint venture
4. Intangible assets

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Classification of non-current assets
(or disposal groups) as Held for Sale

• A non-current asset (or disposal group) is

classified as held for sale or held for
distribution to owners if its carrying
amount will be recovered principally
through a sale transaction rather than
through continuing use.
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 Conditions for classification as held for sale

• A non-current asset (or disposal group) is classified as “held for sale” if

all of the following conditions are met:
1. The asset or disposal group is available for immediate sale in its
present condition subject only to terms that are usual and
customary; and
2. The sale is highly probable (i.e., significantly more likely than not).
i. Management is committed to a plan to sell the asset;
ii. An active program to locate a buyer has been initiated;
iii. The sale price is reasonable in relation to its current fair value;
iv. The sale is expected to be completed within one year; and
v. It is unlikely that the plan of sale will be withdrawn.

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 Exception to the one-year
requirement

• An extension of the period required to complete

a sale does not preclude an asset (or disposal
group) from being classified as held for sale if:
1. the delay is attributable to events or circumstances
beyond the entity’s control; and
2. there is sufficient evidence that the entity remains
committed to its plan to sell the asset (or disposal
group)

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 Event after reporting period

• If the criteria for classification as held for

sale are met after the reporting period, an
entity shall not classify a non-current asset
(or disposal group) as held for sale in those
financial statements when issued.

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 Non-current assets that are to be
abandoned
• An entity shall not classify as held for sale a non-
current asset (or disposal group) that is to be
abandoned since the asset’s carrying amount will
be recovered through continuing use rather than
principally through a sale.
• An entity shall not account for a non-current
asset that has been temporarily taken out of use
as if it had been abandoned.

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 Initial and subsequent
measurement

• Lower of carrying amount and fair value less cost to

sell.
• A write-down to fair value less cost to sell, and related
reversal thereof, is recognized in profit or loss.
• Reversal of impairment is recognized as gain to the
extent of cumulative impairment loss that has been
recognized.
• Depreciation (amortization) ceases during the period
an asset is classified as held for sale. 10
 Changes to a plan of sale

• A non-current asset that ceases to be classified as

held for sale shall be measured at the lower of
the asset’s:
1. Carrying amount before it was classified as held for
sale, adjusted for any depreciation, amortization or
revaluation that would have been recognized had the
asset not been classified as held for sale, and
2. Recoverable amount at the date of subsequent
decision not to sell.
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 Discontinued operations
• A discontinued operation is a component of an
entity that either has been disposed of or is
classified as held for sale, and
1. Represents a major line of business or geographical area
of operations;
2. Is part of a single coordinated plan to dispose of a
separate major line of business or geographical area of
operations; or
3. Is a subsidiary acquired exclusively with a view to resale

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 Component of an entity

• A component of an entity comprises operations

and cash flows that can be clearly distinguished,
operationally and for financial reporting
purposes, from the rest of the entity. It can be
cash generating unit or group of cash generating
units.

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 Presentation of discontinued
operations
• The results of operations of the discontinued
operations, including impairment losses and
actual gain on disposal, is presented as a single
amount, net of tax, after profit or loss from
continuing operations.
• If a component of an entity qualified as
discontinued operation during the year, all of its
results of operations, before and after
classification date, shall be classified as
discontinued operations. 15
Direct costs associated to decision
to dispose a component
• Costs or adjustments directly associated with the
decision to dispose a component should be
recognized and shown as part of discontinued
operations. Examples of such costs include:
1. such items as severance pay or employee termination
costs,
2. additional pension costs,
3. employee relocation expenses, and
4. future rentals on long-term leases 16
 Comparative information

• If, in the current year, a component of an entity is

classified as discontinued operation, an entity
shall re-present the disclosures for prior periods
presented in the financial statements so that the
disclosures relate to all operations that have been
discontinued by the reporting period for the
latest period presented.

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 Events after the reporting period

• If the criteria for classification as discontinued

operation are met after the reporting period but
before the financial statements are authorized
for issue, the entity shall disclose the information
in the notes as non-adjusting event after the
reporting period.

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 Cessation of classification as held for sale:
Effect on comparative statement of financial
position

• The cessation of classification as discontinued

operation is accounted for retrospectively; while
• The cessation of classification as held for sale
(non-current assets and disposal groups that are
not components of an entity) is accounted for
prospectively.

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 FS presentation
• Non-current assets held for sale and assets and
liabilities of disposal groups are presented as
current assets (current liabilities) but separately
from the other assets and liabilities in the
statement of financial position.
• An entity shall not offset the assets and liabilities
of a disposal group.

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