NONCURRENT ASSET HELD
FOR SALE
Noncurrent Asset
➢An asset that does not meet the definition of a current asset
➢May be an individual asset, like land and building, or a disposal group
➢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
Noncurrent Asset Held for Sale
➢PFRS 5, para. 6, provides that a noncurrent asset or disposal group is
classified as held for sale if the carrying amount will be recovered
principally through sale transaction rather than through continuing
use
Conditions for Classification as held for Sale
1. The asset or disposal group is available for immediate sale in the
present condition subject only to terms that are usual and
customary for sale of such assets or disposal group
2. The sale must be highly probable
Highly Probable
1. Management must be committed to plan to sell the asset or
disposal group
2. An active program to locate a buyer and complete the plan must
have been initiated
3. The sale is expected to be a completed sale within one year from
the date of classification as held for sale.
4. The asset or disposal group must be actively marketed for sale at a
sale price that is reasonable in relation to the fair value
5. Actions required to complete the plan indicate that it is unlikely that
the plan will be significantly changed or withdrawn
Measurement of asset held for sale
➢An entity shall measure a noncurrent asset or disposal group classified as held for
sale at the lower of carrying amount or fair value less cost of disposal.
➢Noncurrent asset classified as held for sale shall not be depreciated.
➢If FVLCD is lower than carrying amount of the asset or disposal group, the
writedown to FVLCD is treated as an impairment loss. If the Noncurrent asset is a
disposal group, the impairment loss is apportioned across the assets based on
carrying amount after writing off any goodwill first.
➢If subsequently there is an increase in the FVLCD, an entity shall recognize a gain
but not in excess of any impairment loss previously recognized.
Revalued Asset Classified as held for Sale
PFRS 5, para. 18, provides that when an entity adopts the revaluation model
for measurement of assets, any asset classified as held for sale should be
revalued to fair value immediately prior to the classification as held for sale.
The additional revaluation surplus is equal to the fair value at the
classification date less the carrying amount at that date
Any cost of disposal at classification date should be recognized as
impairment loss for the period and deducted from the asset held for sale.
Subsequent measurement – lower of carrying amount and FVLCD
Abandoned Noncurrent Asset
PFRS 5, para. 13, provides that an entity shall not classify as held for
sale a noncurrent asset or disposal group that is to be abandoned.
TEMPORARILY ABANDONED
PFRS 5, para. 14, provides that an entity shall not account for a
noncurrent asset that has been temporarily taken out of use as if it had
been abandoned.
Change in classification
PFRS 5, para. 27, provides that the entity shall measure the noncurrent
asset that ceases to be classified as held for sale at the lower between:
a. Carrying amount before the asset was classified as held for sale
adjusted for any depreciation, amortization or revaluation that
would have been recognized if the asset had not been classified as
held for sale
b. Recoverable amount at the date of the subsequent decision not to
sell. Recoverable amount is the higher between fair value less cost
of disposal and value in use
Presentation of asset classified as held for
sale
A noncurrent asset classified as held for sale shall be presented separately as
current asset.
PFRS 5, para. 38, provides that if the noncurrent asset is a disposal group
classified as held for sale:
a. The assets of the disposal group shall be described as “noncurrent assets
classified as held for sale” presented separately as a single amount under
current assets.
b. The liabilities of the disposal group shall be described as “liabilities
directly associated with noncurrent assets classified as held for sale”
presented separately as a single amount under current liabilities.
Change in method of disposal
IASB amended IFRS 5 to clarify the accounting treatment when an
entity reclassifies an asset or disposal group from “held for sale” to
”held for distribution to owners” or vice versa without any time lag.
a. The change in classification is considered a continuation of the
original plan of disposal
b. The entity shall continue to apply the “held for sale” or “held for
distribution” accounting.
c. At the time of reclassification, the entity shall recognize any
impairment loss or subsequent increase in fair value less cost of
disposal or distribution
d. The change in classification does not, in itself, extend the period in
which a sale has to be completed.