Ind AS 105

Non-current Assets Held for Sale and

Discontinued Operations.

This standard in general specifies :-

Accounting for Non Current assets
held for sale - RMP
Presentation & Disclosure of
Discontinued Operations
 And In particular it requires

(a) assets that meet the criteria to be classified as held for sale

(i) to be measured at the lower of carrying amount and fair

value less costs to sell, and depreciation on such assets to cease;
and

(ii) to be presented separately in the statement of financial

position and

(b)(ii) the results of discontinued operations to be presented

separately in the statement of comprehensive income.
Applicability :
Classification & Presentation
Requirements shall be applied to
 all of Non Current assets and
 all disposable groups
Measurement Requirements shall be
applied to
 all recognised non-current assets and
disposable groups except the one
specified in Para 5
Measurement Criteria Not Applicable
to Following Assets – Ind AS 105.5
(a) deferred tax assets (Ind AS 12 Income Taxes).

(b) assets arising from employee benefits (Ind AS 19 Employee Benefits).

(c) financial assets within the scope of Ind AS 39 Financial Instruments:

Recognition and Measurement.

(d) non-current assets that are accounted for in accordance with the fair
value model in Ind AS 40 Investment Property…..What About IP Under
Cost Model ?

(e) non-current assets that are measured at fair value less costs to sell in
accordance with Ind AS 41 Agriculture.

(f) contractual rights under insurance contracts as defined in Ind AS

104 Insurance Contracts. Rationale
?
 Principal Criteria
An entity shall classify an asset or disposal group as “Held For
Sale” If Its carrying amount will be principally recovered
Through sale rather than use through continuing use &
This criteria must be met before the end of the reporting period

Secondary Criteria
The asset (or disposal group) must be available for immediate
sale in its present condition

Subject to terms that are usual & customary for sales of such
assets

And its sale must be highly probable =

this happens upon fulfilment of other criteria's===>>
A Current Asset being sold as an Individual asset ( Not as a part
of a disposal group )will never be classified as HFS ` in Ind AS
 Appropriate Actively
Active
Level of marketed for
programme to
Management locate a buyer sale at a price
must be and complete that is
Committed the plan reasonable

Probability of Share holder’s Approval to be considered

Actions should indicate that it

is unlikely that significant The sale should be
changes to expected to qualify for
recognition as a completed
the plan will be made or that sale within one year from
the plan will be withdrawn. the date of classification
Ind AS 105 applicable to non current assets
held for distribution to owners also

The classification, presentation and

measurement requirements in this Ind AS
applicable to a non-current asset (or disposal
group) that is classified as held for sale apply
also to a non-current asset (or disposal group)
that is classified as held for distribution to
owners acting in their capacity as owners (held
for distribution to owners).
 Quiz 1

On November 30, 2011, Entity X becomes committed to a plan

to sell a property. However, it plans certain renovations to
increase its value prior to selling it. The renovations are
expected to be completed within a short span of time i.e., 2
months.

Can the property be classified as held for sale at the reporting

date i.e., December 31, 2011?
 Acquisition of a non-current asset (or
disposal group) exclusively with a
view to its subsequent disposal,

Classification AT Acquisition date If & Only If the

criteria of sale within a year is met.

The other criteria of available immediately for sale

in its present condition and sale is highly probable
need not be at the acquisition date but must be met
within a short period following the acquisition
(usually within three months – Non adjusting event)
Events or circumstances may extend the period to
complete the sale beyond one year, such extension is
justified in following circumstances.

Firm Purchase
Commitment is
made – Buyer
unexpectedly
imposes conditions
Management
Committed – Unforeseen
Expects others may Circumstances
impose conditions

Justification
Beyond a
Year
1. Are the following statements about the requirements of IFRS5 Non-
current assets held for sale and discontinued operations true or false?

(1) An asset that meets the criteria for classification as held for sale after
the end of the reporting period but before the authorisation of the
financial statements should be measured in the statement of financial
position at the lower of carrying amount and fair value less costs to
sell.

(2) To be classified as an asset held for sale, the sale must be expected
to be completed within 12 months from the end of the financial year.

Statement (1) Statement (2)

A False False
B False True
C True False
D True True
1. A

Both statements are false.

IFRS5 para 8 requires an expectation that the sale will be

completed within 12 months of the date of classification as
held for sale, and not of the end of the financial year. Para 12
prohibits adjustment to the carrying amount of an asset
classified as held for sale after the year end.
 Following assets are not to be classified as
Held For Sale

 Abandoned Assets are not to be classified as

“Held for Sale “

 This is because its carrying amount will be

recovered principally through continuing use.

 Those assets taken out temporarily out of use.

Steps Apply Criteria
Existing Non Current Assets
Classify as Non current assets held for sale

Measure at lower of carrying amount and fair value

less cost to sale or less cost to distribute as the case
may be. ( Only incremental cost ,not facility holding
cost)
Newly Acquired Non Current Assets
If the newly acquired non-current assets meet the
criteria then initially they are measured at lower of its
carrying amount had it not been so classified ( i.e.
cost) and fair value less cost to sale.
 Just BEFORE Initial Classification

Immediately before the initial

classification of the asset (or disposal
group) as held for sale, the carrying
amounts of the asset (or all the assets
and liabilities in the group) shall be
measured in accordance with
applicable Ind AS 105.18
 UPON Classification
Recognise any anticipated losses on immediate or subsequent
sale Immediately .

AS

Impairment loss in Profit or Loss of the Period

As Also

Non Current Assets held for sale should NOT be

depreciated. Interest & other expenses associated
with liability will continue to be recognised.
 Gain from subsequent increase in Fair value
For
For aa Non
Non Current
Current assets
assets
Such
Such gain
gain shall
shall be
be recognised
recognisedbut butnot
notininexcess
excessofofcumulative
cumulative
impairment
impairment loss loss under
under IndInd AS
AS 105
105 or
or Ind
Ind AS
AS 36.36.
For
For Group
Group of of Assets
Assets
Not
Not inin excess
excessofofthe thecumulative
cumulative impairment
impairment lossloss
thatthat has
has been
been recognised,
recognised, eithereither in accordance
in accordance withwith thisthisIndIFRS
AS oror
previously
previously in in accordance
accordance with with Ind
Ind AS
AS36,36,ononthethenon-current
non-current
assets
assets that
that areare within
within the the scope
scope ofof the the measurement
measurement
requirements
requirements of of this
this IFRS.
Ind AS.
The
The impairment
impairment loss (or any
loss (or any subsequent
subsequent gain)
gain) recognised
recognised forfora
adisposal
disposal group
group shallshall
reducereduce (or increase)
(or increase) the carrying
the carrying amount
amount of the non-current
of the non-current assets assets
in theingroup
the groupthat that
are are within
within the
the scope
scope of measurement
of the the measurement requirements
requirements of thisof Ind
this AS,
IFRS, in
in the
the order
order of allocation
of allocation set out
set out in Ind
in Ind AS AS
36 36
 CHANGE OF PLANS
• Any adjustment to the value should be
shown in income from continuing
operations for the period.
• If an asset is removed from a disposal
group, the disposal group will continue to
be classified as such only if it still meets the
criteria set out in the Standard.
• If the criteria are not met, then the
individual noncurrent assets of the group
will be reviewed to see if they meet the
criteria to be classified as held for sale.
 Change of Plan
Asset or Group of Asset Cease to be Held for Sale

Asset or group of Asset to be valued at the lower of the

carrying amount BEFORE the asset or disposal group
was classified as held for sale

As adjusted for any subsequent depreciation,

amortization, or revaluation
AND

Its recoverable amount at the date of the

decision not to sell.
 Presentation of Non Current assets or
disposal group classified as held for sale.
Entity shall present non current assets and related liabilities
separately.
Assets and liabilities shall not be offset
If the disposal group is a newly acquired subsidiary that meets
the criteria to be classified as held for sale on acquisition
disclosure of the major classes of assets and liabilities is not
required.
An entity shall not reclassify or re-present amounts presented
for non-current assets or for the assets and liabilities of
disposal groups classified as held for sale in the statements of
financial position for prior periods to reflect the classification
in the statement of financial position for the latest period
presented.
Discontinued Operations is a component of an
entity that has either been

disposed off

Or

is classified as held for sale.

Discontinued Operations (DOP)

Represents a separate major line of business or

geographical area of operations :or

Is a part of a single Co-ordinated plant 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.
Presenting Discontinued Operations P Or L

An entity shall disclose:

(a) a single amount in the statement of

comprehensive income comprising the
total of:
(i) the post-tax profit or loss of discontinued
operations and
(ii) the post-tax gain or loss recognised on the
measurement to fair value less costs to sell
or on the disposal of the assets or disposal
group(s) constituting the discontinued
operation.
Presenting Discontinued Operations – P Or L
Further an analysis of the single amount into:

(i) the revenue, expenses and pre-tax profit or loss of discontinued

operations;

(ii) the related income tax expense as required by paragraph 81(h) of Ind AS
12;

(iii) the gain or loss recognised on the measurement to fair value less costs to
sell or on the disposal of the assets or disposal group(s) constituting the
discontinued operation; and

(iv) the related income tax expense as required by paragraph 81(h) of Ind AS
12.

If an entity ceases to classify a component as held for sale, the

results of that element must be reclassified and included in
income from continuing operations.
Presentation in Statement of Cash Flow

The net cash flows attributable to the operating,

investing and financing activities of discontinued
operations.

These disclosures may be presented either in the

notes or in the financial statements.

These disclosures are not required for disposal

groups that are newly acquired subsidiaries that meet
the criteria to be classified as held for sale on
acquisition .
Important issues concerning Restatement

Only for Discontinued Operations

& Not for Non Current Held for sale.

NCH4S = SOFP, Related Liability Not to

be Offset.

DOP = SOCI + SOCF

 DISCLOSURE:
NONCURRENTASSETS
• Noncurrent assets held for sale and assets of
disposal groups must be disclosed separately from
other assets in the balance sheet. The liabilities
must also be disclosed separately in the balance
sheet.
• Several other disclosures are required, including a
description of the noncurrent assets of a disposal
group, a description of the facts and circumstances
of the sale, and the expected manner and timing of
that disposal.
• Any gain or loss recognized for impairment or any
subsequent increase in the fair value less costs to
sell should also be shown in the applicable
segment in which the noncurrent assets or disposal
group is presented.
 DISCONTINUED
OPERATIONS:PRESENTATION AND
DISCLOSURE
• Any cumulative income or expense recognized directly
in equity relating to a noncurrent asset or disposal
group classified as held for sale must be disclosed.
• A discontinued operation is a part of an entity that has
either been disposed of or is classified as held for sale
and
(a) Represents a separate major line of business or
geographical area of operations;
(b) Is part of a single coordinated plan to dispose of
separate major line of business or geographical area of
operations; or
(c) Is a subsidiary acquired exclusively with a view to
resale.