Assets HFS & Discontinued Segments Flashcards
To be classified as HFS Asset
IFRS 5.7 must meet criteria:
For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable.
For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, except as permitted by paragraph 9, and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The probability of shareholders’ approval (if required in the jurisdiction) should be considered as part of the assessment of whether the sale is highly probable.
Measurement of HFS Asset
Lower of carrying value and fair value less costs to sell
IFRS 5.15
If fair value goes up after recording
May increase up to point of prior loss that was recorded
Depreciation
Asset depreciated up to the point it is reclassed to HFS. Then stopped.
HFS on B/S
Reported separately to other assets
Entry to record a HFS
DR HFS Asset (lower of fair value & carrying)
DR Impairment loss
CR Asset
To be classified as a component
Must meet one of the following criteria:
- Represent a separate major line of business or geographical area of operations
- Is part of a single co-ordinated plan to dispose of a separate major line of business/ geog area
- It is a subsidiary acquired exclusively w/ a plan to resell
A component has cash flows distinguishable from the rest of the entity
Criteria to record component as discontinued
- Does it meet component criteria
- Does it meet the HFS criteria
Measurement of a discontinued component
Lower of carrying value and fair value less selling costs
How to record income from discontinued operations
“Income from discontinued operations”
Report on separate line
Income up to date of decision \+ Income after \+ Loss on write down to fair value less selling costs = "Income from discontinued operations" less taxes