Ind AS 105

Non-current Assets Held For Sale And Discontinued Operations

Objective and scope of Ind AS 105

a. Criteria for classifying existing assets as held for sale

b. Measurement of non-current assets (or disposal group) classified as held for

sale

c. Disclosure requirement for non-current assets (or disposal group) classified as

held for sale and discontinued operations.
Objective
The objective of this Indian Accounting Standard (Ind AS) is to specify the
accounting for assets held for sale, and the presentation and disclosure of
discontinued operations. In particular, this Ind AS requires:

(a) assets that meet the criteria to be classified as held for sale to be measured
at the lower of carrying amount and fair value less costs to sell, and
depreciation on such assets to cease; and

(b) assets that meet the criteria to be classified as held for sale to be presented
separately in the balance sheet and the results of discontinued operations
to be presented separately in the statement of profit and loss.
 Criteria for classifying existing assets as held for sale

Available for Immediate Sale in

present condition
Key requirements for Non
Current Assets asset held
for sale

Sale must be highly probable

 Measurement of non-current assets (or disposal group) classified as
held for sale

An entity should measure a non-current asset (or disposal group) classified as held
for sale at the lower of its carrying amount and fair value less costs to sell.
Teaser!
M1 (classified as NCA held for sale) carrying amount as on March 31, 2018
is Rs. 100 Mn.

Fair value less cost to sell is Rs. 110 Mn. as on March 31, 2018.
Teaser!
M1 carrying amount as on March 31, 2018 is Rs. 10 lakhs with remaining
economic life 5 years). Method of depreciation SLM.

On Oct. 1, 2018 ABC Ltd. (owner of M1) classified M1 as NCA held for sale.
Determine carrying amount of M1 as on March 31, 2019 at cost.
Teaser!
Cadila Healthcare Ltd. purchased a generator set on 01.01.2019 for Rs. 1,00,000
(economical life 5 years) with an intention to sell. How it will be classified as on
March 31, 2019 –

a. Current asset?
b. NCA held for sale?
c. NCA – PPE?
d. NCA – Investment property?
 Criteria for classifying existing assets as held for sale

Available for Immediate Sale in

present condition
Key requirements for Non
Current Assets asset held
for sale

Sale must be highly probable

Teaser - Available for Immediate Sale?

i. A property being used as a headquarters by the entity needs to be sold. Property can be
vacated only after a replacement is available

ii. A manufacturing facility, prior to selling the needs to clear a backlog of uncompleted order.

iii. In above example (ii), if entity intends to sell the manufacturing facility along with the
uncompleted orders.
1 a. Exception to the period of One year

An entity can still classify an asset (or disposal group) as held for sale, even if the timeframe of
one year to conclude the sale transaction has lapsed. For this:
i. the delay must have been caused by the events or circumstances which are beyond the
control of the entity; and

ii. there must be sufficient evidences that the entity is still committed to it selling plan.
Teaser - Available for Immediate Sale?

An entity is committed to its selling plan of a manufacturing facility in its present condition
and so classifies it as held for sale. After a firm purchase commitment, the buyer’s inspection
identifies environmental damages not previously known to exist. The entity is required by the
buyer to make good the damage, which will extend the timeframe of one year to complete
the sale within one year. However the entity has initiated actions to make good the damage
and satisfactory rectification is highly probable.

In this situation exception to one year requirement will met?

1 b. Asset acquired exclusively with a view to subsequent disposal

When an entity acquires a non-current asset (or disposal group) exclusively with a view to its
subsequent disposal, the non-current asset (or disposal group) is classified as held for sale at
the acquisition date.

This standard provides a short period (usually three months) to meet the classification criteria
that don’t met at the acquisition except requirement of one year.
Teaser - Available for Immediate Sale?

An entity has acquired a building exclusively with a view of its subsequent disposal. The
management is highly confident that the property can be sold in one year. The property
requires refurbishing it to enhance its value which is highly probable to be completed in less
than a period of three months.
1 d. Criteria met after reporting period

If the criteria of held for sale are met after the reporting period but before the date of
authorization the financial statements, a non-current asset should not classify as held for sale.

However, when those criteria are met after the reporting period but before the approval of
the financial statements for issue, the entity shall disclose the information.
Question 1:

On March 1, 20X1, entity R decides to sell one of its factories.

An agent is appointed and the factory is actively marketed.
As on March 31, 20X1, it is expected that the factory will be sold by February 28, 20X2.
However, in May 20X1, the market price of the factory deteriorated.
Entity R believed that the market will recover and thus did not reduce the price of the factory.
The company’s accounts are authorised for issue on June 26, 20X1.

Should the factory be shown as held for sale as on March 31, 20X1?
Question 2:
On March 31, 2016 ABC Ltd. classified M1 as NCA held for sale and reported it at cost for
Rs. 5,00,000.

As on March 31, 2016 remaining economic life of M1 was 5 years. ABC was following SLM
method of depreciation on M1 with depreciation amount of Rs. 1 lakh pa.

On March 31, 2018 ABC Ltd. decides to use M1 and not to sell. Determine its carrying
amount as on March 31, 2018 at cost.

Extension:
What if recoverable amount of M1 as on March 31, 2018 is –
a. Rs. 4,00,000
b. Rs. 2,50,000
Indian Data
 NCA held for sale

Company Name Amount (Rs. In Mns.)

Reliance Infrastructure Ltd. 6677.70
Dilip Buildcon Ltd. 2961.10
Steel Authority Of India Ltd. 589.10
Wipro Ltd. 451.00
Strides Pharma Science Ltd. 343.70
Procter & Gamble Hygiene & Health Care Ltd. 215.20
H C L Infosystems Ltd. 59.90
Advanced Enzyme Technologies Ltd. 48.20
Solar Industries India Ltd. 16.00
K I O C L Ltd. 0.90
 Post-tax profit / (loss) from discontinued operations
Company Name Amount (Rs. In Mns.)
Reliance Communications Ltd. -29780
Jaiprakash Associates Ltd. -1880.3
Tata Power Co. Ltd. -717.4
C G Power & Indl. Solutions Ltd. -520.3
N M D C Ltd. -4.4
Hindustan Copper Ltd. -2.3
Escorts Ltd. 0
Sudarshan Chemical Inds. Ltd. 22
Minda Industries Ltd. 29.1
Chambal Fertilisers & Chemicals Ltd. 36.8
E I D-Parry (India) Ltd. 195.3
Reliance Infrastructure Ltd. 337.6
Akzo Nobel India Ltd. 1949
Strides Pharma Science Ltd. 7351.4
Tata Chemicals Ltd. 11424.9
Unichem Laboratories Ltd. 26780.1
Group Assignment
 NCA held for sale
Company Name Group No.
Reliance Infrastructure Ltd. 1
Dilip Buildcon Ltd. 2
Steel Authority Of India Ltd. 3
Wipro Ltd. 4
Strides Pharma Science Ltd. 5
Procter & Gamble Hygiene &
1
Health Care Ltd.
H C L Infosystems Ltd. 2
Advanced Enzyme Technologies Ltd. 3
Solar Industries India Ltd. 4
K I O C L Ltd. 5
 Post-tax profit / (loss) from discontinued operations

Company Name Group

Reliance Communications Ltd. 1

Jaiprakash Associates Ltd. 2

Tata Power Co. Ltd. 3

C G Power & Indl. Solutions Ltd. 4

N M D C Ltd. 5

Reliance Infrastructure Ltd. 1

Akzo Nobel India Ltd. 2

Strides Pharma Science Ltd. 3

Tata Chemicals Ltd. 4

Unichem Laboratories Ltd. 5