NCA held for sale and discontinued operations

Question 1

IFRS 5 covers

Answer 1

All non-current assets and disposal groups except:
Deferred tax assets, employee benefits, investment properties (if using FV), financial assets under IFRS 9 (fair value assets), biological assets, contractual rights under insurance

Disposal group = group of assets to be disposed of in a single transaction and liabilities directly associated with those assets will be transferred

Question 2

When to classify as NCA held for sale

Answer 2

When an entity will recover benefit principally through a sale and not use of the asset

Criteria: 
Available immediately for sale in its present condition 
Sale must be highly probable (PUMAS):
Price reasonable in market 
Unlikely that any significant changes will be made to the plan 
Management committed to plan
Actively looking for buyer
Sale expected to occur within 1 year

Question 3

NCA held for sale

Measurement and presentation (5 step process)

Answer 3

Step 1: Before reclassifying as held for sale, remeasure per IAS 16 (PPE, using revalue model (FV less impairment and depreciation))

Step 2: On classification - write it down to its FV less cost to sell (if below carrying in step 1) - goes to P&L

Step 3: Stop any depreciation / amortisation

Step 4: Any subsequent changes to FV are recognised as a further impairment loss or reversal of impairment loss

Step 5: Presented as - Single amounts (of assets and liabilities i.e all held for sale items added together), BS own line item, Seperately from other assets and liabilities, normally as current assets and liabilities (do not offset)

Question 4

NCA held for sale

Disclosure

Answer 4

Must disclose in notes:
Description of NCA
Description of facts and circumstances around sale (including timing)
The gain or loss recognised on assets classified as held for sale
If applicable the operating segment in which the asset exists in

Question 5

NCA to be abandoned

Answer 5

Not classified as held for sale as their carrying amount will be recovered through use, however may meet discontinued operations

Question 6

Discontinued operations

Definition

Answer 6

A component of an entity that either has been disposed of or is classified as held for sale and:

Represents a separate major line of business or geographic area of operations and is part of a single co-ordinated plan to dispose of a line of business.
OR
Is a sub acquired with the view of resale.

Question 7

Discontinued operations

Presentation and disclosure

Answer 7

P&L: Single amount comprising of the post-tax profit/loss of discontinued ops and the post-tax gain/loss of its disposal.

Disposal = remeasurement to FV less cost to sell

Notes: the revenue, expenses, pre-tax profits, income tax expense, gain/loss on measurement to FV less cost to sell, net cash flows attributable to all sections of cashflow

Question 8

Subsidiary held for sale

Answer 8

When an entity is committed to a sale plan involving the loss of control but retention of NCI. The assets and liabilities are still classified as held for sale and disclosed as discontinued operation

Question 9

Ethical consideration

Answer 9

Items held for sale indicated expected cash inflows in the short term and any loss making operating segments to be disposed off