IFRS 5 NCA held for sale Flashcards
held for sale
NCA or disposal group should be classified as ‘held for sale’ if its carrying amount will be recovered primarily through a sale transaction rather than through continuing use
disposal group
a disposal group is a group of assets that the entity intends to dispose of in a single transaction
held for sale
following conditions to be met before an asset or disposal
group can be classified as ‘held for sale’:
* The item is available for immediate sale in its present condition.
* The sale is highly probable.
* Management is committed to a plan to sell the item.
* An active programme to locate a buyer has been initiated.
* The item is being actively marketed at a reasonable price in relation to its current fair value.
* The sale is expected to be completed within one year from the date of classification.
* It is unlikely that the plan will change significantly or be withdrawn.
measurement
Items classified as held for sale should, according to IFRS 5, be measured at the lower of their carrying amount and fair value less costs to sell.
Where fair value less costs to sell is lower than carrying amount, the item is written down and the write down is treated as an impairment loss.
If a non-current asset is measured using a revaluation model and it meets the criteria to be classified as being held for sale, it should be revalued to
fair value immediately before it is classified as held for sale.
The asset is
then revalued again at the lower of the carrying amount and the fair value less costs to sell. The difference is the selling costs and should be charged against profits in the period.
presentation
IFRS 5 states that assets classified as held for sale should be presented separately from other assets in the statement of financial position.
changes to a plan
If a sale does not take place within one year, IFRS 5 says that an asset (or disposal group) can still be classified as held for sale if:
* the delay has been caused by events or circumstances beyond the entity’s control
* there is sufficient evidence that the entity is still committed to the sale.
changes to a plan
If the criteria for ‘held for sale’ are no longer met, then the entity must cease to
classify the assets or disposal group as held for sale. The assets or disposal
group must be measured at the lower of:
* ‘its carrying amount before it was classified as held for sale adjusted for any depreciation, amortisation or revaluations that would have been recognised had it not been classified as held for sale
* its recoverable amount at the date of the subsequent decision not to sell
