1. Objective of IFRS 5
IFRS 5 provides rules for:
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Classification of non-current assets held for sale
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Measurement of these assets
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Presentation of discontinued operations in financial statements
The goal is to ensure users can clearly identify assets that will be recovered through sale, not through use.
2. Scope of IFRS 5
IFRS 5 applies to:
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Non-current assets (or disposal groups) held for sale
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Discontinued operations
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Assets held for distribution to owners
It does not apply to:
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Deferred tax assets (IAS 12)
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Employee benefits (IAS 19)
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Financial instruments (IFRS 9)
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Investment property measured at fair value (IAS 40)
3. Classification Requirements
3.1 Asset Held for Sale Criteria
An asset is classified as held for sale only when:
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Management commits to a plan to sell
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Asset is available for immediate sale
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There is an active program to find a buyer
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Sale is highly probable
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Expected sale completion within 12 months
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Asset is being actively marketed at a reasonable price
If all 6 criteria are met → classify as held for sale.
3.2 Disposal Group
A disposal group = a group of assets + liabilities to be sold together as one transaction.
Example:
Selling a factory + its equipment + related employee liabilities.
4. Measurement Rules
4.1 Measurement Basis
When classified as held for sale:
Asset = lower of
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Carrying amount, or
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Fair value less costs to sell (FVLCTS)
Depreciation stops once classified as held for sale.
4.2 Impairment
If FVLCTS < carrying amount → impairment loss recognized in P/L.
If value increases later → can reverse impairment, but not above the original carrying amount before classification.
5. Presentation Requirements
5.1 Statement of Financial Position
Show separately:
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“Assets held for sale” (as a single line)
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“Liabilities directly associated with assets held for sale”
No offsetting allowed.
5.2 Statement of Profit or Loss – Discontinued Operations
A discontinued operation is a component of an entity that:
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Is disposed of (or held for sale), and
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Represents a separate major line of business or geographical area, or
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Is part of a single coordinated plan to dispose such a line.
Must present separately:
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Profit/loss from discontinued operations
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Gains/losses on disposal
Shown as 1 line in P/L → detail in notes.
6. Disclosure Requirements
Entities must disclose:
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Description of discontinued operation
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Revenue, expenses, profit/loss of discontinued operations
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Cash flows from operating, investing, financing activities
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Gain/loss recognized on disposal
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Major classes of assets / liabilities held for sale
7. Practical Examples
Example 1 – Asset Held for Sale
A machine:
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Carrying amount = $100,000
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FVLCTS = $85,000
→ Classify as asset held for sale
→ Measure at lower of 100,000 and 85,000
→ Impairment loss = $15,000
Depreciation stops immediately.
Example 2 – Disposal Group
A company commits to sell a store branch:
Assets:
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Inventory $40,000
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Equipment $90,000
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Building $200,000
Liabilities:
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Staff liabilities $30,000
FVLCTS of disposal group = $280,000
Carrying amount of assets–liabilities = $330,000
→ Impairment = $50,000
→ Disposal group presented separately in balance sheet.
Example 3 – Discontinued Operation
Company sells its entire electronics division (a major business line).
Results from the division:
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Revenue = $3 million
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Expenses = $2.2 million
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Profit = $0.8 million
Loss on disposal = $0.3 million
P/L presentation (single line):
Profit from discontinued operations: $0.5 million
Notes will show the breakdown.
Example 4 – Asset not meeting criteria
Management wants to sell a building but:
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No active marketing
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No buyer identified
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Sale timeline uncertain
→ Does not meet IFRS 5 criteria
→ Remains as property, plant and equipment (IAS 16)
→ Depreciation continues.