IFRS 5- NCA Held for Sale and Discontinued Operations

Question 1

Objective

Answer 1

specify the accounting for assets held for sale and the presentation and disclosure of discontinued operations

Question 2

scope

Answer 2

All NCA’s and disposal groups of an entity.

Does not include:
* Deferred tax assets
* IAS 19 -Employee Benefit
* IFRS 9-Fin Instruments
* IAS 40- Investment property
* IAS 41- Agriculture
* IFRS 17- Insurance contracts

Question 3

Criteria for Held for Sale:

Answer 3

• Should have carrying amount recovered principally through a sale transaction rather than continuing use.
• Must be available for immediate sale in present condition, subject only to usual and customary terms.
• Highly probable sale, mgmt commited to a plan to sell. Initiating an active program to locate a buyer, and actively marketing asset at reasonable price.
• Expect sale in one year.

Question 4

Classification in Special Circumstances:

Answer 4

• entity’s control may extend the sale period beyond one year, but the entity must remain committed to the plan.
• entity committed to a sale plan involving loss of control of a subsidiary shall classify all assets and liabilities of that subsidiary as held for sale.

Question 5

Assets to Be Abandoned:

Answer 5

• NCA to be abandoned not classified under IFRS5 but as discontinued operations if meet criteria.

Question 6

Measurement and Recognition of Impairment:

Answer 6

Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Impairment losses and reversals are recognized, with gains limited to the cumulative impairment loss.

Question 7

Changes in Sale Plan or Distribution:

Answer 7

assets cease to be classified as held for sale, and adjustments are made to reflect their new status.

Question 8

What is a discontinued operation

Answer 8

Component of an entity disposed of, held for sale, or acquired with a view to resale, representing a separate major line of business or geographical area.

Question 9

Disclosure requirements:

Answer 9

• post-tax profit or loss of discontinued operations, including gains or losses on disposal or FV measurement.
• analysis of revenue, expenses, pre-tax profit or loss, related income tax, and gains or losses on disposal.
• Disclose net cash flows attributable to discontinued operations.
• Present income from continuing operations and discontinued operations separately.
• classified as held for sale, reclassify results of operations from discontinued to continuing operations