NCA Held for Sale and Discontinued Operations Flashcards
when an asset is no longer used for business purposes and is now being held for sale - it changes from IAS 16 to
IFRS 5 Non Current Assets Held for Sale and Discontinued Operations
what are the criteria for an asset to be classified as held for sale
must be available for immediate sale in present condition
sale must be highly probable
what is a disposal group
a group of assets that are to be disposed of in a single transaction
examples of scenarios that it is highly probable an asset will be held for sale
- management committed to plan to sell
- asset is being actively marketed at a reasonable selling price for its fair value
- the sale is expected to be completed within one year (unless beyond control e.g. delay in sale because of regulatory issues)
- unlikely for the plan to change/be withdrawn
how are NCAs held for sale measures
at lower of
Carrying value on date held for sale
Fair value less costs of selling
some companies buy with an intention of selling on - how should these assets be measured in the financial statements
fair value less costs to sell
what happens
(1) on the date an assets is classified as held for sale
(2) at the end of the year the asset is classified as held for sale
(3) on the date of disposal of the asset
(1) compare fv-selling cost and cv, recognise impairment if needed
(2) further impairment recognised if FV - selling cost decreases or gain if increase (gains should not exceed existing losses)
depreciation stops as it is now a current asset
(3) disposal gain/loss
why might be the reason that an asset that was classified as held for sale is no longer classified as held for sale
usually management’s plans changes
what is the treatment for assets that are being moved from held for use
measure at lower of :
- previous carrying amount less any depreciation that would have been charged
- recoverable amount at date of decision not to sell
what is recoverable amount
higher of :
- fair value less costs to sell
- value in use
Where are assets held for sale presented in the financial statements
last item in current assets
where are disposal groups presented in the financial statements
liabilities associated with disposal group should be presented separately
examples of an entity that might be discontinued
subsidiary
line of business
geographical location
what is a discontinued operation
a component of an entity being disposed of or classified as held for sale
how should discontinued operations be disclosed in the financial statements
single figure
- profit or loss of discontinued operations
note
