IND AS 105 - Non Current Asset held for sale and Discontd Operations Flashcards
What is the coverage of this standard in terms of scoped in and out items as non current assets as per the requirement of this standard?
What is the meaning of the term current assets in the context of Non current assets as per the provisions of IND AS 105?
An entity classifies an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
What is the definition of discontinued operation as per the provisions of IND AS 105?
is a component of an entity that either has been disposed of or is classified as held for sale and:
(a) represents a separate major line of business or geographical area of operations; or
(b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
(c) is a subsidiary acquired exclusively with a view to resale.
What is the definition of the term disposal group as per the standard IND AS 105?
Disposal group is a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. A disposal group may be a group of cash-generating units, a single cash-generating unit, or part of a cash-generating unit.
The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated in accordance with Ind AS 36 ‘Impairment of Assets’, or if it is an operation within such a cash generating unit.
What is the definition of Non current assets as per IND AS 105?
Non-current assets are assets that do not meet the definition of current assets.
What are the conditions that must be satisfied for CLASSIFICATION OF NON-CURRENT ASSETS (OR DISPOSAL GROUPS) AS HELD FOR SALE OR AS HELD FOR DISTRIBUTION TO OWNERS as per IND AS 105?
What is the meaning of Available for Immediate sale in the present condition as per the provisions of IND AS 105?
The asset (or disposal group) must be available for immediate sale in its present condition. The terms that are usual and customary for sale of similar assets (or disposal group) doesn’t disqualify to being classified as held for sale.
However, they will not be considered as available for immediate sale if they continue to be vital for the entity’s ongoing operations or being refurbished to enhance their value. Thus, an asset (or disposal group) cannot be classified as a non-current asset (or disposal group) held for sale, if the entity intends to sell it in a distant future.
Examples 6 & 7
What are the conditions that must be satisfied for the sale to be highly probable as per IND AS 105?
What is the treatment to the assets and Liabilities as per IND AS 105, when the holding com loses it’s control of the subsidiary?
An entity which has committed to a sale plan which involves loss of control of subsidiary shall classify all the assets and liabilities of that subsidiary as held for sale when the criteria set out above is met, regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale.
What are the cases in which there are exceptions to the period of 1 year as seen previously as per IND AS 105?
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 evidence that the entity is still committed to it selling plan.
Whether sale here as per the standard would include Exchange of one non current asset with the other non current asset?
Sale transaction includes exchange of non-current assets for other non-current assets when the exchange has commercial substance in accordance of Ind AS 16 Property, Plant and Equipment.
When asset is acquired with the view of subsequent disposal after acquisition, what is the relevant treatment? whether can be considered under this standard or any other standard accordingly?
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 if both of the following conditions are satisfied:
a) The one year requirement is met subject to exceptions mentioned in section 8.4.3.2 above; and
b) It is highly probable that any other criteria (refer section 8.4.1 and 8.4.2 above) that is not met at the acquisition date will be met within a short period following the acquisition (usually within three months).
What happens when the criteria for Non current asset classified as held for sale is met after the reporting period? can we still classify the same under this standard or under any other standard?
If the criteria of held for sale are met after the reporting period, an entity should not classify a non-current asset (or disposal group) as held for sale in those financial statements when issued. 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 specified in section 8.6.3 – Disclosures
What happens when there is an abandonment of Non current assets? Will be classified as HFS or under discontinued operations or be continued to be treated as per the provisions of IND AS 16 by providing for depreciation etc?
This treatment is very important, in the sense when it will be treated as Asset under IND AS 16 and when it need to be shown as discontinued operation as per this standard.
How the Non current asset held for sale or Disposal groups needs to be measured as per the provisions of IND AS 105?
Example 16 - ICAI SM
How should the recognition of Impairment losses and reversals be made as per the provisions of IND AS 105 and how does it compare with the provisions of IND AS 36?
These are similar to the provisions of IND AS 36 and hence not broken down in separate questions in detail.
What is the accounting treatment that needs to be followed when there is a changes to the plan of sale of the assets which are held for sale and in the disposal group as per the provisions of IND As 105?
After making the requisite changes in relation to a change in the plan of sale, what happens to other assets in the disposal group which are continued to be classified for HFS asset?
What is the separate presentation requirements for Discontinued operations?
