5. Non-current assets held for sale and discontinued operations

Question 1

What is IFRS 5?

Answer 1

Non-current assets held for sale and discontinued operations

Question 2

When do we classify a NCA as a NCA held for sale?

Answer 2

When its carrying amount will be recovered principally through a sale transaction rather than continued use.

Question 3

What are the conditions to classify an asset as a NCA held for sale? 4 things

Answer 3

• The asset must be available for immediate sale in its present condition
• The sale must be highly probable
• The sale is ‘expected’ to occur within one year of its classification
• It is unlikely that significant changes will occur or the plan to sale will be withdrawn

Question 4

What do we mean by the criteria that the sale must be highly probable?

Answer 4

• Management are committed to sell
• There is an active programme to locate a buyer
• The asset is being actively marketed at a reasonable price

Question 5

How do we measure NCA held for sale?

Answer 5

The lower of

• Carrying amount
• FV less cost to sell

Question 6

What is a component of an entity that has either been disposed of, or is classified as held for sale?

Answer 6

A discontinued operation

Question 7

What are the three requirements to be a discontinued operation?

Answer 7

• Could be a separate major line of business or geographical area
• Part of a single coordinated plan to dispose of a major line of business or geographical area
• Is a subsidiary acquired exclusively with a view to resale

Question 8

Why do we show discontinued operations separately?

Answer 8

Enables users of the entities financial statements to predict future performance more accurately

Question 9

When an entity discloses a single amount on the profit or loss to represent a discontinued operation, then what musts that comprise of?

Answer 9

• The post tax profit or loss of the discontinued operations

- The post tax gain or loss recognised on the disposal

Question 10

Where must an analysis of the single amount representing the discontinued operation be shown?

Answer 10

Either

• Notes
• P+L

Question 11

What must the analysis of a discontinued operation show?

Answer 11

• The revenue, expenses and pre-tax profit
• The related income tax expense
• The gain or loss on disposal

Question 12

How do the discontinued operations look on the P+L?

Answer 12

Question 13

Do we charge depreciation on a NCA held for sale?

Answer 13

No