Ia3 CH4

INTERMEDIATE ACCOUNTING 3
Chapter 4: Non-current Assets Held for Sale and Discontinued Operations

A noncurrent asset is presented in the classified are available for immediate distribution in their present
statement of financial position as current asset only condition and the distribution is highly probable.
when it qualifies to be classified as “held for sale” in
accordance with PFRS 5. Non-Current Assets that are to Be Abandoned
An entity shall not classify as held for sale a non-current
PFRS 5 applies to the following non-current assets: asset (or disposal group) that is to be abandoned since
1. Property, plant and equipment the asset’s carrying amount will be recovered through
2. Investment property measured under the Cost continuing use rather than principally through a sale.
model
3. Investments in associate or subsidiary or joint An entity shall not account for a non-current asset that
venture has been temporarily taken out of use as if it had been
4. Intangible assets abandoned.
Classification of Non-Current Assets (Or Disposal Initial And Subsequent Measurement

Groups) As Held for Sale Lower of carrying amount and fair value less cost to sell.
A non-current asset (or disposal group) is classified as
held for sale or held for distribution to owners if its A write-down to fair value less cost to sell, and related
carrying amount will be recovered principally through reversal thereof, is recognized in profit or loss.
a sale transaction rather than through continuing use.
Reversal of impairment is recognized as gain to the
Conditions for Classification as Held for Sale extent of cumulative impairment loss that has been
A non-current asset (or disposal group) is classified as recognized.
“held for sale” if all of the following conditions are met:
Depreciation (amortization) ceases during the period an
1. The asset or disposal group is available for asset is classified as held for sale.
immediate sale in its present condition subject only
to terms that are usual and customary; and
2. The sale is highly probable (i.e., significantly more Changes to a Plan of Sale
likely than not A non-current asset that ceases to be classified as held
i. Management is committed to a plan to sell for sale shall be measured at the lower of the asset’s:
the asset; 1. Carrying amount before it was classified as held
ii. An active program to locate a buyer has for sale, adjusted for any depreciation,
been initiated; amortization or revaluation that would have been
iii. The sale price is reasonable in relation to its recognized had the asset not been classified as held
current fair value; for sale, and
iv. The sale is expected to be completed within 2. Recoverable amount at the date of subsequent
one year; and decision not to sell.
v. It is unlikely that the plan of sale will be
withdrawn. Discontinued Operations
A discontinued operation is a component of an
Exception To the One-year Requirement entity that either has been disposed of or is classified as
An extension of the period required to complete a sale held for sale, and
does not preclude an asset (or disposal group) from 1. Represents a major line of business or
being classified as held for sale if: geographical area of operations;
1. the delay is attributable to events or 2. Is part of a single coordinated plan to dispose of a
circumstances beyond the entity’s control; and separate major line of business or geographical
2. there is sufficient evidence that the entity area of operations; or
remains committed to its plan to sell the asset (or 3. Is a subsidiary acquired exclusively with a view to
disposal group) resale
Exclusive View of Subsequent Disposal
A noncurrent asset that is acquired exclusively with a Component of an Entity
view to its subsequent disposal is classified as “held for A component of an entity comprises operations and cash
sale” at the acquisition date if the “sale within one-year” flows that can be clearly distinguished, operationally and
requirement is met within a short period of time after the for financial reporting purposes, from the rest of the
acquisition. entity. It can be cash generating unit or group of cash
generating units.
Event After Reporting Period
If the criteria for classification as held for sale are met
after the reporting period, an entity shall not classify a
non-current asset (or disposal group) as held for sale in
those financial statements when issued.
Property Dividends
Noncurrent assets declared as property dividends are
classified as held for distribution to owners when they
INTERMEDIATE ACCOUNTING 3
Chapter 4: Non-current Assets Held for Sale and Discontinued Operations
Presentation Of Discontinued Operations

The results of operations of the discontinued operations,
including impairment losses and actual
gain on disposal, is presented as a single amount,
net of tax, after profit or loss from continuing operations.
If a component of an entity qualified as discontinued

operation during the year, all of its results of operations,
before and after classification date, shall be classified as
discontinued operations.
Direct Costs Associated to Decision to Dispose a

Component
Costs or adjustments directly associated with the
decision to dispose a component should be recognized
and shown as part of discontinued operations. Examples
of such costs include:
1. such items as severance pay or employee
termination costs,
2. additional pension costs,
3. employee relocation expenses, and
4. future rentals on long-term leases
Comparative Information
If, in the current year, a component of an entity is
classified as discontinued operation, an entity shall re-
present the disclosures for prior periods presented in the
financial statements so that the disclosures relate to all
operations that have been discontinued by the reporting
period for the latest period presented.
Events After the Reporting Period

If the criteria for classification as discontinued operation
are met after the reporting period but before the financial
statements are authorized for issue, the entity shall
disclose the information in the notes as non-adjusting
event after the reporting period.
Cessation of Classification as Held for Sale: Effect on

Comparative Statement of Financial Position
The cessation of classification as discontinued operation
is accounted for retrospectively; while
The cessation of classification as held for sale

(noncurrent assets and disposal groups that are not
components of an entity) is accounted for prospectively.
FS Presentation
Non-current assets held for sale and assets and liabilities
of disposal groups are presented as current assets
(current liabilities) but separately from the other assets
and liabilities in the statement of financial position.
An entity shall not offset the assets and liabilities of a
disposal group.

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INTERMEDIATE ACCOUNTING 3

Chapter 4: Non-current Assets Held for Sale and Discontinued Operations

Classification of Non-Current Assets (Or Disposal Initial And Subsequent Measurement

Presentation Of Discontinued Operations

If a component of an entity qualified as discontinued

Direct Costs Associated to Decision to Dispose a

Events After the Reporting Period

Cessation of Classification as Held for Sale: Effect on

The cessation of classification as held for sale

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