PFRS 5 – Non-current Assets Held for Sale and

Discontinued Operations
OBJECTIVE

 To specify the accounting for assets held for sale, and the presentation and
disclosure of discontinued operations.

SCOPE

PFRS 5 applies to

 To all recognized Non-Current Assets and to all Disposal Groups of an entity:

a) PPE
b) Investment property measured under the cost model
c) Investment in associate, subsidiary, or joint venture
d) Intangible Assets

PFRS 5 measurement does NOT apply to:

 Deferred tax assets (IAS 12 Income Taxes).

 Assets arising from employee benefits (IAS 19 Employee Benefits).
 Financial assets within the scope of IFRS 9 Financial Instruments.
 Investment property measured using the fair value model (IAS 40 Investment
Property).
 Agricultural assets measured at fair value less costs to sell (IAS 41 Agriculture).
 Groups of contracts within the scope of IFRS 17 Insurance Contracts.

DEFINITION OF TERMS

Non-Current Assets

 Non-current assets is an asset that does not meet the definition of a current assets.
 May be an individual asset, like land and building, or a disposal group

Disposal Group

 Group of assets to be disposed of, by sale or otherwise, together as a Group in

single transaction, and liabilities directly associated with those assets that will be
transferred in the transaction.
 Group includes goodwill acquires in a business combination if the group is a CGU to
which goodwill has been allocated.

CLASSIFICATION OF NON-CURRENT ASSETS (OR DISPOSAL GROUPS) AS HELD

FOR SALE OR AS HELD FOR DISTRIBUTION TO OWNERS (MARGA)

Classification of non-current assets (or disposal groups) as held for sale

  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.

Conditions for classification as held for sale

A non-current asset (or disposal group) is classified as “held for sale” if all of the
following conditions are met:

1) The asset (or disposal group) is available for immediate sale in its present
condition subject only to terms that are usual and customary
2) The sale highly probable.
 Management is committed to a plan to sell the asset (or disposal group);
 An active program to locate a buyer and complete the plan has 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.
 The sale should be expected to qualify for recognition as a completed sale
within one year from the date of classification
 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.
 If required in the jurisdiction, the probability of shareholders' approval
should be considered as part of the assessment of whether the sale is
highly probable.

Exception to the one-year requirement

An extension of the period required to complete a sale does not preclude an asset (or
disposal group) from being classified as held for sale if:

1) The delay is caused by events or circumstances beyond the entity's control

2) There is sufficient evidence that the entity remains committed to its plan to sell the
asset (or disposal group).

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.

Exclusive view of subsequent disposal

 A non-current asset that is acquired exclusively with a view to its subsequent

disposal is classified as held for sale at the acquisition date if the “sale within one-
year” requirement is met an it is highly probable that the other requirement is met
within a short period of time after the acquisition (usually within three months)

Classification of non-current assets (or disposal groups) as held for

distribution to owners
A non-current asset (or disposal group) is classified as held for distribution to owners
when the entity is committed to distribute the asset (or disposal group) to the owners.

1) The assets must be available for immediate distribution in their present condition
2) The distribution must be highly probable.
 Actions to complete the distribution must have been initiated
 It should be expected to be completed within one year from the date of
classification.
 Actions required to complete the distribution should indicate that it is
unlikely that significant changes to the distribution will be made or that the
distribution will be withdrawn.
 The probability of shareholders' approval, if required in the jurisdiction,
should be considered as part of the assessment of whether the distribution is
highly probable.

Non-current assets that are to be abandoned

 An entity shall not classify as held for sale a non-current asset (or disposal group)
that is to be abandoned since the asset’s carrying amount will be recovered
through continuing use rather than principally through a sale.
 An entity shall not account for a non-current asset that has been temporarily taken
out of use as if it had been abandoned.

MEASUREMENT

Measurement of non-current assets (or disposal group) (MANDY)

 Non-current asset held for sale – lower of its carrying amount and fair value less
costs to sell
 Non-current asset held for distribution – lower of its carrying amount and fair value
less costs to distribute

Newly acquired assets

 Newly acquired asset meets the criteria to be classified as held for sale
 Lower of its carrying amount and fair value less cost to sell
 Asset acquired as part of a business combination
 Fair value less costs to sell

Costs expected beyond one year

 When sale is expected to occur in over one year, costs to sell are discounted
(measured) at present value.
 Any increase in the present value of costs to sell due to time passage is recorded
in profit or loss as a financing cost.

Measurement before initial classification of the asset as held for sale

 Carrying amounts of the asset shall be measured in accordance with applicable

IFRSs
Subsequent remeasurement of disposal groups

 If a disposal group includes assets/liabilities not within the scope of PFRS 5’s
measurement requirements, these items are remeasured under the relevant IFRSs
before measuring the fair value less costs to sell for the entire disposal group.

Recognition of impairment losses and reversals

 An impairment loss is recognized for any initial or subsequent write-down of a non-

current asset (or disposal group) to fair value less costs to sell.
 Subsequent changes in FVLCTS are recognized in P/L as IMPAIRMENT losses or
gains of reversal on impairment
 Gain on reversal of Impairment is recognized only to the extent of cumulative
impairment losses that previously been recognized
 For disposal groups, gains are similarly recognized up to the cumulative
impairment loss amount.
 Gains or losses not previously recognized by the date of sale are recognized upon
derecognition.

Depreciation and amortization

 Held for sale assets are not depreciated or amortized while they are classified as
held for sale.
 Interest and other related expenses attributable to financial instrument include in a
disposable group are continued to be recognized

Changes to a plan of sale or distribution (YRA)

 If the criteria for classifying as held for sale or held for distribution to owners are no
longer met, the asset or disposal group is no longer classified as such, and
applicable guidance is followed to account for this change.
 If reclassified between held for sale and held for distribution, this is treated as a
continuation of the original disposal plan.
 An asset CEASES to be classified as held for sale is measured that the lower of the
asset’s:
a) Carrying amount before it was classified as held for sale, adjusted for any
depreciation, amortization or revaluation that would have been recognized
had the asset not been classified as held for sale
b) Recoverable amount at the date of subsequent decision to sell
 Any adjustments are included in profit or loss from continuing operations.
 Financial statements are amended retrospectively if the asset ceasing to be
classified as held for sale/distribution is a subsidiary, joint venture, associate, or
similar interest.

DISCONTINUED OPERATIONS

Discontinued Operations (LARA)

  A discontinued operation is "a component of an entity that either has been
disposed of or is classified as held for sale, and
a) represents a major line of business or geographical operations;
b) is part of a single coordinated 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."

Component of an entity

 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." (PFRS 5.Appendix A)
 Operations and cash flows can be clearly distinguished operationally and for
financial reporting purposes if the assets, liabilities, income, and expenses that are
directly attributable to the component will be eliminated if the component is to be
sold.
 A component of an entity can be a cash-generating unit (CGU) or group of CGUS,
an operating segment, a reporting unit, a geographical area or operations, a
subsidiary, or an asset group.

A discontinued operation occurs when two things happen:

a) A company eliminates (or will eliminate) the results of operations and cash flows of
a component of an entity from its ongoing operations; and
b) There is no significant continuing involvement in that component after its disposal

Discontinued operations occur at the earlier of the date the component is actually
disposed of and the date the criteria for classification as held for sale are met.

Presentation of discontinued operations

 The results of discontinued operations are presented in the statement of profit or

loss and other comprehensive income as a single amount comprising the total of
the following:
a) post-tax profit or loss of discontinued operations; and
b) post-tax gain or loss recognized on the measurement to fair value less costs
to sell or on the disposal of the assets constituting the discontinued
operation

The results of discontinued operations are presented after "profit or loss from continuing
operations."

Gains or losses on disposal of discontinued operations

 If the actual disposal of a discontinued operation occurs in the same period that
the component is classified as "held for sale," the gain or loss on disposal of
discontinued operations is the actual gain or loss on the disposal.
 If the actual disposal of a discontinued operation occurs in a subsequent period
after the component is classified as "held for sale," the entity recognizes an
 estimated loss on disposal in the period that the component is classified as
discontinued operation. However, any gain on sale is not recognized until the
component is actually disposed of.
 Gains or losses on disposal of discontinued operations, including estimated losses,
are presented as part of the single amount representing the post-tax results of
discontinued
 operations.
 Gains or losses on held for sale assets that do not meet the criteria for
presentation as discontinued operations are presented as part of continuing
operations.

PRESENTATION AND DISCLOSURE (YRA)

 Held for sale assets are presented in the statement of financial position as current
assets
 The assets and liabilities of a disposal group are presented separately.
 Offsetting is prohibited.