IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Chapter 37 / Noncurrent Assets Heldfor Sale and Discontinued Operations (IFRS 5)

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for sale, the sale of a noncurrent asset must be highly probable and the sale of the asset must be expected to qualify for recognition as a completed sale within one year. In the case of the equipment that had recently been leased, at July 31, 20X5, and July 3 1, 20X6, there was a significant amount of this equipment in the balance sheet. The leases had expired but no decision had been made as to whether to refurbish and sell the equipment or to abandon it. Therefore, these assets will not qualify as held-for-sale assets at either date. They should be shown as noncurrent assets and de– preciated. Held-for-sale assets are not depreciated. It would appear also that the fair value less costs to sell is significantly higher than the carrying value. The selling prices of the two sets of assets are $10 million and $16 million respectively, and the refur– bishment costs are $2 million and $3 million respectively. Therefore, even taking into account the refur– bishment costs, the expectation is that they will recover significantly more revenue than the carrying value. Thus, the assets are not impaired at July 31, 20X5, or July 31, 20X6. 8. DISCONTINUED OPERATIONS: PRESENTATION AND DISCLOSURE 8.1 Any cumulati ve income or ex pense recogni zed directl y in equity rel atin g to a non current as– set or disposal group classifi ed as held for sale must be disclosed . 8.2 A discontinued operation is a part of an entity that has either been disposed of or is classified as held for sale and (a) Represents a separate major line of business or geographi cal area of opera tions ; (b) Is part of a single coordinated plan to dispo se of separate major line of business or geo– graphica l area of operations; or (c) Is a subs idiary acquired exclus ive ly with a view to resale . 8.3 In the income statement, the total of the after-tax profit or loss of the discontinued operation and the afte r-tax ga in or loss recogn ized on the measurement to fair va lue less cost to se ll (or on the disposal) should be presented as a sing le figu re. 8.4 IFRS 5 requires det ailed discl osure of revenu e, ex penses, pretax pro fit or loss, and the related income tax expense, either in the notes or on the face of the income statement. If this information is presented on the face of the income sta tement, the informati on should be sepa rate ly disclosed from info rmation rel atin g to co nti nuing operatio ns. 8.5 Regarding the presentation in the cas h flow sta tement, the net cas h flows attributab le to the operating, investing, and financi ng act ivities of the discontinued operation sho uld be shown sepa– rate ly on the face of the stat ement or disclosed in the notes. Any di scl osures sho uld cover both the current and all prior peri od s that have bee n shown in the fina ncial statements. Retrospecti ve cl assi– fica tion as a di scontinued operation where the criteria are met after the balance shee t date is pro– hibited by IFRS 5. 8.6 In addition, adj ustments made in the curre nt acco unting period to amounts that have prev i– ously been disclosed as discontinued operatio ns from prior period s mu st be se parately di sclosed . If an entity ceases to cl assify a compo nent as held for sale, the results of that element must be recl as– sified and included in income from continuing operations. Facts Z plans to dispose of a group of net assets that form a disposal group. The net assets at December 31, 20X5, are Carrying value at December 31, 20X5 $m Goo dwi ll Property, plant , and equipment Inventory Financial assets (profi t of $2 million recognized in equity) Financial liabilities 6 Case Study 6

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