IFRS 5

NON-CURRENT ASSETS
HELD FOR SALE
LECTURE MATERIAL
Prepared by BIANCA NEL CA (SA)
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Watch:
Part 1
CONTENT
SAICA'S PRINCIPLES OF EXAMINATION

The concepts and topics of IFRS 5 are at a CORE LEVEL

1. Objective and Scope

2. Important Definition
3. Classification as held for sale
4. Measurement & Recognition
5. Recognition of gains/losses at date of sale
6. Non-current assets to be abandoned
7. Changes in plan of sale
8. Presentation and disclosure
9. Discontinued Operation
10. IFRIC 17

Questions to expect:
• Integrated
• Income taxes (deferred tax)
• Journals
• Disclosure
• Discussion
• Anything!

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1. OBJECTIVE & SCOPE (IFRS 5.1)

MEET IFRS 5
CRITERIA

MEASURE @ LOWER:
- CA
- FV - CTS

STOP depreciation
on asset

Assets that meet the criteria to be classified as held for sale to be:

- Measured at the lower of carrying amount and fair value less costs to sell
- Depreciation on such assets to cease
- To be presented separately in the SFP

Results of discontinued operations to be presented separately in the SOCI

2. IMPORTANT DEFINITIONS (IFRS 5 APPENDIX A)

Cash Smallest identifiable group of assets generating cash inflows that are
generating largely independent of cash inflows from other assets or group of assets.
unit
Component of Operations and cash flows that can be clearly distinguished,
an entity operationally and for financial reporting purposes, from the rest of the
entity.
Discontinued Component of an entity that either has been disposed of or is classified
operation as held for sale and:
1. Represents a separate major line of business or geographical area
of operations,
2. Is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations; or
3. Is a subsidiary acquired exclusively with a view to resale.
Disposal A group of assets to be disposed of, by sale or otherwise, together as a
group group in a single transaction, and liabilities directly associated with
those assets that will be transferred in the transaction.

* Includes goodwill if the group is a CGU to which goodwill has been

allocated or if it is an operation within such a CGU

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Watch:
Part 2

3. CLASSIFICATION AS HELD FOR SALE

When will you classify a non-current asset (or disposal group) as held for sale? (IFRS 5.6)

If its carrying amount will be recovered principally through a sale transaction

rather than through continuing use

CRITERIA (IFRS 5.7-11)

1. Asset /disposal group must be available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets (or disposal
groups) and its sale must be highly probable

2. For the sale to be highly probable, the appropriate level of management must be
committed to a plan to sell the asset/disposal group, and an active programme to
locate a buyer and complete the plan must have been initiated

3. The asset/disposal group must be actively marketed for sale at a price that is
reasonable in relation to its current fair value

4. Sale should be expected to qualify for recognition as a completed sale within one year
from the date of classification except if acceptable grounds for extension (IFRS 5.9)

5. 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

4 SALE

= PLAN 

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Extension of the period > 1 year (IFRS 5.11)

Does NOT EFFECT classification IF:

✓ The delay is caused by events or circumstances beyond the entity’s control
and
✓ Sufficient evidence exists that the entity remains committed to its plan to sell the
asset (or disposal group)
This will be the case when the criteria in Appendix B are met
*costs to sell will measured at their present value

Meeting the criteria after reporting date (IFRS 5.12)

An Entity shall NOT classify a non-current asset (or disposal group) as held for sale in those
Financial Statements when they are issued
• BUT if the criteria are met after reporting date and BEFORE authorisation of issue of
the Financial Statements disclose the following in the notes:
✓ Description of non-current asset (or disposal group)
✓ Description of facts and circumstances of sale
✓ If applicable-segment in which non-current asset/disposal group is presented

31 Dec 20.17 31 March 20.17

Non-current assets held for distribution to owners (IFRS 5.12A)

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

Criteria
SAME AS ABOVE

1. The assets must be available for immediate distribution in their present condition
2. The distribution must be highly probable
3. Actions to complete the distribution must have been initiated
4. Actions to complete the distribution are expected to be completed within one year
from the date of classification
5. 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

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4. MEASUREMENT & RECOGNITION

MEASUREMENT IMMEDIATELY BEFORE INITIAL CLASSIFICATION

The carrying amount of a non-current asset (or disposal group) shall, immediately before the
initial classification as held for sale, be measured in accordance with the applicable IFRS.
For example, Property, plant and equipment will be measured in accordance with IAS 16.

IFRS 5 CRITERIA MET

MEASURE @ LOWER:
- CA
- FV - CTS

INITIAL MEASUREMENT (IFRS 5.15-19)

Individual asset Disposal group
Entity shall measure a non-current asset (disposal group) classified as held for sale at the LOWER
of is
carrying amount (at moment of reclassification)
and fair value less cost to sell.
=> The adjustment is an impairment loss.
If the non-current asset held for sale falls If the non-current asset in the disposal group
OUTSIDE the scope of IFRS 5 in respect of held for sale falls OUTSIDE the scope of IFRS 5
measurement requirements, the individual asset in respect of measurement requirements, the
shall NOT be restated to the lower of CA and FV individual asset shall NOT be restated to the
less cost to sell, but shall be carried at the value lower of CA and FV less cost to sell, but shall
determined by applicable Standard. be carried at the value determined by
applicable Standard.

SUBSEQUENT MEASUREMENT
CA of individual asset/disposal group will be the fair value less cost to sell,
less any impairment losses that were determined at initial classification

If the FV less cost to sell at subsequent measurement is different to FV less cost to sell at initial
measurement:
It should be remeasured to the NEW FV less cost to sell

This will result in a further impairment loss or the reversal of the previous impairment loss.
On subsequent measurement of a DISPOSAL GROUP, the carrying amounts of assets and liabilities
that are NOT within the scope of the measurement requirements of IFRS 5,
but are included in the disposal group classified as held for sale (including current assets such as
inventories), shall be measured in accordance with the applicable Standard BEFORE the fair
value less cost to sell of the disposal group is remeasured.

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IMPAIRMENT LOSS (IFRS 5.20-25)

Individual asset Disposal group
Entity will recognise an Impairment loss recognised for a disposal group shall
impairment loss for any initial reduce the CA of non-current assets that fall within the
or subsequent write-down of scope of the measurement requirements of IFRS 5 in the
the non-current asset to FV less order of allocation set out in IAS 36.104(a), (b) and .122
cost to sell.

Impairment loss calculated will Impairment shall be allocated to reduce the CA as follows:
be treated in terms of IFRS 5.
1. First against goodwill
CA of the asset affected will be 2. The remainder against other assets in proportion
credited and the impairment to their CA
loss will be debited to P/L in
the statement of profit or loss
and other comprehensive
income (NOT revaluation
surplus).

Dr Impairment loss (P/L)

(never revaluation surplus)
Cr Asset (SFP)

REVERSAL OF IMPAIRMENT LOSS

Subsequent gains are limited to - An entity shall recognise a gain for any subsequent
the cumulative impairment increase in fair value less costs to sell on a disposal
losses recognised in terms of group:
IFRS 5 and previously under - To the extent that it has not been recognised when
IAS 36 restating the fair values of assets falling outside the
scope of the measurement requirements of IFRS5 but
- Not in excess of the cumulative impairment loss that
has been recognised earlier (per IAS 36 or IFRS 5) on
the non-current assets that are within the scope of
the measurement requirements of this IFRS
- The gain recognised for the disposal group shall
increase the CAs of the non-current assets falling
within the scope of the measurement requirements
of IFRS 5 ONLY
- The gain will be allocated to the individual assets in
the disposal group in the same order as a normal
impairment loss for a CGU
- Reversals of impairment losses may not be allocated
to goodwill at all but will be allocated only to non-
current assets falling within the scope of the
measurements requirements of IFRS 5
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Watch:
Part 3

STEPS TO FOLLOW AT INITIAL AND SUBSEQUENT MEASUREMENT OF DISPOSAL GROUP

1. Determine the CA of all the individual assets in the disposal group on date of initial
classification in accordance with the applicable standard
2. Determine the fair value less cost to sell of the disposal group on date of initial
classification
3. Determine the LOWER of CA and Fair value less cost to sell
4. Calculate the impairment loss
5. Allocate impairment loss to non-current assets that fall within scope of
measurement of IFRS 5 (see Impairment loss discussion above)

Exclusions (IFRS 5.5)

The measurement provisions do not apply to:
❑ Deferred tax assets (IAS 12)
❑ Assets arising from employee benefits (IAS 19)
❑ Financial assets (IFRS 9)
❑ Investment Property (Fair value model) (IAS 40)
❑ Non-current assets measured at fair value less costs to sell (IAS 41)
❑ Contractual rights under insurance contracts (IFRS 4)

IFRS 5 CRITERIA MET

MEASURE @ LOWER:
- CA
- FV - CTS

5. RECOGNITION OF GAINS/LOSSES AT DATE OF

SALE OF NON-CURRENT ASSET
❑ Gain/ loss from derecognition = net disposal proceeds less carrying amount
❑ HOW DO YOU CALCULATE?
❑ To be included in profit or loss
❑ Gains shall NOT be classified as revenue

❑ The consideration receivable to be recognised initially at its fair value (if payment
deferred then must be present valued)

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6. NON-CURRENT ASSETS TO BE ABANDONED

(IFRS 5.13-14)
❑ CA will be recovered principally through continuing use
❑ Include non-current assets (or disposal groups) that are to be used to the end of their
economic life and that are to be closed rather than sold
❑ An entity shall not classify as held for sale a non-current asset (or disposal group) that
is to be abandoned
❑ If the disposal group to be abandoned meets the discontinued operation qualification
criteria the entity shall present the results and cash flows of the disposal group as
discontinued at the date on which it ceases to be used.
❑ An entity shall not account for a non-current asset that has been temporarily taken out
of use as if it had been abandoned

7. CHANGES IN PLAN OF SALE

(IFRS 5.26-29)
WHEN (IFRS 5.29)?
If criteria for classification no longer met the entity shall CEASE to classify as NCAHFS

The non-current asset shall be measured at the LOWER OF:

❑ CA BEFORE classification as held for sale/distribution to owners, adjusted for any
depreciation, amortisation or revaluations that would have been recognised had the
asset (or disposal group) not been classified as held for sale/distribution to owners
AND
❑ its recoverable amount at the date of the subsequent decision not to sell or
distribute

If the non-current asset is part of a CGU this RA is the CA that would have been recognised
after the allocation of any impairment loss arising on that CGU in accordance with IAS 36

Individual assets no longer classified as held for sale

❑ Any required adjustment to the CA included in P/L from continuing operations

❑ The line item in which the adjustment is included must be disclosed
❑ If it is an item of PPE or an intangible asset that has been carried under the
revaluation model
=> adjustment shall be treated as a revaluation increase or decrease in OCI

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Individual item that is part of disposal group no longer classified as held for sale

❑ If an individual asset or liability is removed from a disposal group classified as held

for sale,
=> remaining assets and liabilities of the disposal group still to be sold will
=> continue to be measured as a disposal group ONLY if the disposal group still
meets the criteria
❑ IF NOT - the remaining non-current assets of the disposal group that individually still
meet the criteria to be classified as held for sale will be measured individually at the
lower of their carrying amounts and fair values less costs to sell at that date
❑ Any non-current assets that no longer meet the criteria shall cease to be classified as
held for sale

Watch:
Part 4

8. PRESENTATION & DISCLOSURE (IFRS 5.31-42)

Statement of Financial Position (self study)
• Present non-current assets separately from other assets (will appear under current
assets)
• Present liabilities separately from other liabilities (will appear under current
liabilities)
• Those assets and liabilities shall not be offset and presented as a single amount
• The major classes of assets and liabilities classified as held for sale shall be separately
disclosed either in the SFP or in the notes (except as permitted by paragraph 39)
• An entity shall present separately any cumulative income or expense recognised in
OCI relating to a non-current asset (or disposal group) classified as held for sale e.g.
revaluation surplus and mark-to-market reserve
• (Para 39 - If the disposal group is a newly acquired subsidiary that meets the
criteria on acquisition, disclosure of the major classes of assets and liabilities is not
required)
• Do not restate comparatives

Notes (self study)

• Para 41 and Para 42

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Below are illustrations of what the disclosure for Non-current assets held for sale must look
like.

Non-current assets held for sale

A decision to dispose of the assets of the [insert information about group] was taken on
[insert date] after a formal detailed disposal plan for the assets of [asset] was approved.
The plan regarding the once-off sale of the assets was at a stage of completion on [insert
date], where no realistic possibility of withdrawal existed. It is expected that the plan for
the sale of the assets will be completed by [insert date] for cash.

The disposal group under discussion comprises:

Plant and equipment Rvalue
Intangible assets Rvalue
The total will be the FV
Inventory Rvalue
less cost to sell at year-
Debtors end. Rvalue
Creditors Rvalue
Etc. Rvalue

An impairment loss of [Rvalue] was recognised upon initial classification of the disposal
group as held for sale. The impairment loss was included under loss after tax on
remeasurement on the face of the statement of profit or loss and other comprehensive
income.

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9. DISCONTINUED OPERATIONS
What are discontinued operations?

❑ A component of an entity that either has been disposed of or is classified as held for
sale
AND
• Represents a separate major line of business or geographical area of
operations
• Is part of a single co-ordinated plan 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 (self study)

❑ Para 31 – 36A
❑ Main disclosures:
• A single amount in the SOCI comprising the total of:
✓ the post-tax profit or loss of discontinued operations and
✓ 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
• An analysis of the single amount above into:
✓ The revenue, expenses and pre-tax profit or loss of discontinued operations
✓ The related income tax expense as required by paragraph 81(h) of IAS 12
✓ 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
✓ The related income tax expense as required by paragraph 81(h) of IAS 12.

❑ 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 end of the reporting period for the latest period presented
❑ If an entity ceases to classify a component of an entity as held for sale, the results of
operations of the component previously presented in discontinued operations shall
be reclassified and included in income from continuing operations for all periods
presented
❑ The amounts for prior periods shall be described as having been re-presented

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DISCONTINUED OPERATIONS

Below are illustrations of what the disclosure for Non-current assets held for sale must look
like.

Discontinued operations Look out for all information in the question that is
Revenue applicable, do not just use the income/expenses that is
given directly. Other information might affect the
Cost of sales
statement as well, for example fair value adjustments
Gross profit
etc.
Other income
Other expenses
Finance cost
Profit before tax This is not just current tax, but
Income tax deferred tax as well. Remember
benefit/(expense) that all permanent differences
Profit for the year must also be taken into account
for the current tax calculation.

10. IFRIC 17
Distribution of non-cash assets to owners
An entity may distribute assets other than cash as dividends to its owners. An entity may
also give its owners a CHOICE of receiving either non-cash assets or a cash alternative.
IFRIC 17 clarifies that:
✓ A dividend payable should be recognised when the dividend is appropriately
authorised and is no longer at the discretion of the entity
✓ An entity should measure the dividend payable at the fair value of the net assets to
be distributed
✓ An entity should remeasure the liability at each reporting date and at settlement,
with changes recognised directly in equity as adjustments to the amount of the
distribution (retained earnings)
✓ An entity should recognise the difference between the dividend paid and the
carrying amount of the net assets distributed in profit or loss, and should disclose it
as a separate line item in profit or loss

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