IFRS 5 Non-current assets held for sale and discontinued operations By; Mohammad Fathi Aouf

History of IFRS 5 Date Development September 2002 Project added to IASB agenda 24 July 2003 Exposure Draft ED 4 Disposal of Non-current Assets and Presentation of Discontinued Operations published 31 March 2004 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations issued 22 May 2008 Amended by Improvements to IFRSs 2007 (sale of a controlling interest in the subsidiary) 16 April 2009 Amended by Improvements to IFRSs 2009 (disclosure requirements in other standards) 25 September 2014 Amended by Improvements to IFRSs 2014 (changes in methods of disposal)

Non-current assets Non-current assets are assets that do not meet the definition of a current asset. A current asset is an asset that satisfies any of the following criteria it is expected to be realized in, or is intended for sale or consumption in, the entity’s normal operating cycle it is held primarily for the purpose of being traded

Discontinued Operations A discontinued operation is 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 geographical area of operations, is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to resale.

Objective The objective of this IFRS 5 is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations.

Objective contin. In particular, the IFRS 5 requires: assets that meet the criteria to be classified as held for sale to be presented separately in the statement of financial position and the results of discontinued operations to be presented separately in the statement of comprehensive income.

Scope of IFRS 5 Applies to all recognised non-current assets and disposal groups of an entity Assets classified as non-current in accordance with IAS 1 Presentation of Financial Statements shall not be reclassified as current assets until they meet the criteria of IFRS 5

Scope of IFRS 5 contin. If an entity disposes of a group of assets, possibly with directly associated liabilities (i.e. an entire cash-generating unit), together in a single transaction, if a non-current asset in the group meets the measurement requirements in IFRS 5, then IFRS 5 applies to the group as a whole. Non-current assets to be abandoned cannot be classified as held for sale

Example An entity has agreed in a directors’ meeting to sell a building, and has tentatively started looking for a buyer for the building. The price of the building has been fixed at $4m and a surveyor has valued the building based on market prices at $3.6m. The entity will continue to use the building until another building has been found with equivalent facilities, and in a suitable location for the office staff, who will not be relocated until the new building has been found. Additionally, the entity is planning to sell part of its business and has actively marketed the business at a fair price but, before the business can be sold, government approval is required and any sale requires government approval. This means that the sale time is difficult to determine and it may take longer than one year to sell the disposal group

Example contin. ANSWER The building will not be classified as held-for-sale as it is not available for immediate sale because, until new premises have been found, the office staff will remain in the existing building. Also, the directors have only tentatively started looking for a buyer which may indicate that the entity is not committed to the sale. Additionally, the price being asked for the building is above the market price, and is not reasonable compared to that price. It is unlikely that the entity will sell the building for that price. The disposal group, however, would be classified as held-for-sale because the delay is caused by events or circumstances beyond the entity’s control, and there is evidence that the entity is committed to selling the disposal group.

Non-current assets it is expected to be realised within twelve months after the reporting period; or it is cash or a cash equivalent asset, unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period Assets held for sale and discontinued operations A guide to IFRS 5 An IAS Plus guide

Presentation and Disclosure An asset classified as held for sale should be presented in the statement of financial position separately from other assets. Typically a separate heading ‘non-current assets – held for sale’ would be appropriate. Where a disposal group is held for sale, the assets and liabilities within it should also be separately identified. Such assets and liabilities should not be netted off for disclosure purposes and presented as a single line item. The major classes of assets and liabilities of the disposal group should be presented separately in the statement of financial position or in the notes.

Presentation and Disclosure contin. This disclosure is not, however, required where the disposal group was classified as held for sale when it was newly acquired. The separate presentation is required when the assets are classified as held for sale. It is therefore not appropriate to restate prior period figures in the statement of financial position to reflect the current classification. An entity should also provide a description of any non-current assets, or a disposal group, classified as held for sale or sold including details of any sale and expected time scales for disposal.

Presentation and Disclosure contin. If a sale has taken place within the reporting period, then the gain or loss on disposal should be separately identified either in the statement of comprehensive income or in the notes. Where held for sale assets have been included within a segment as part of the segmental analysis presented in accordance with IFRS 8 Operating segments, this information should be highlighted

References IFRS CERTIFICATE Learning materials Brendan Doyle, BA (Hons) in Accounting CPA http://www.iasplus.com/en/standards/ifrs/ifrs5 Deloitte IFRS pocket guide 2014