Inventories (MFRS 102) & Noncurrent Assets Held for Sale & Discontinued Operations (MFRS 5)

Group members: Nur Ain Bt Ismail Siti Zainab Bt Hamzah Azmeer B Nasri Athira Bt Saat

A127620 A128014 A128017 A130694

Non- Current Asset Held for Sale and Discontinued Operation

MFRS 5

Introduction
Adopts the classification held for sale. Introduces the concept Specifies that assets to classified

Asset held for sale and disposal group MFRS 5* Discontinued Operation

Definition
Para 6: an entity shall classify a non current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use Para 13-14* Asset that are to be abandoned or scrapped (rather than sold) are not classified as asset held for sale.

A Disposal group defined as:*

A 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. [MFRS 5(Appendix A)] A disposal group may be a group of cash-generating units, a single cash-generating unit, or part of a cashgenerating unit.

Example: Annual Report 2012 Yinson Berhad

Asset held for sale and disposal group

Classification requirement - para 7 12A

Assets that are to be sold

Available for immediate sale

Sale must be highly probable

Available for immediate sale

Para 7 requires that the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups)

Sale must be highly probable

The Standard defines highly probable as meaning significantly more likely than probable, where probable means more likely than not. [MFRS 5(Appendix A)] 4 requirement under MFRS 5,8

Sale must be highly probable

The appropriate level of management must be committed to a plan to sell the asset (or disposal group); An active programme to locate a buyer and complete the plan must have been initiated;

The asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value; and
The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Example : Annual Report 2012 MTD ACPI Engineering Berhad

MFRS 5 : APPENDIX A
MFRS 5 s guidance on how the entity should determine fair value less cost to sell is limited. Appendix A of the standard defines fair value as: The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Costs to sell is defined as: The incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income tax expense.

FAIR VALUE LESS COSTS TO SELL

MFRS 5.17 Costs to sell need to be discounted if a sale is expected to occur beyond one year. The unwinding of the discount over subsequent reporting periods is then recognized as a finance cost in profit or loss MFRS 5.9 In practice, discounting selling costs is usually not necessary. A held for sale classification generally requires a completed disposal within a one year period. Discounting may therefore only occur in situations in which the sales transaction is delayed beyond one year in accordance with IFRS 5.9.

Discontinued Operation
A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and: [MFRS 5(32) and MFRS 5(Appendix A)] 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.

Discontinued Operation
MFRS 5(31) explains that a component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cashgenerating unit or a group of cash generating units while being held for use. As in IAS 36, a cash-generating unit is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. [MFRS 5(Appendix A)]

Example: Annual Report 2012 Yinson Berhad

Example : Annual Report 2012 MTD ACPI Engineering Berhad

THANK YOU