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NONCURRENT ASSETS HELD FOR SALE
AND DISCONTINUED OPERATIONS
(IFRS 5)
1.
SCOPE
The purpose of IFRS 5 is to specify the accounting for asse ts held for sale and the present ation and
disclos ure of discontinued operations. The measurement provisions of this Intern ational Financial
Reporting Sta ndard (IFRS) do not apply to deferred tax asse ts, assets arising from employee bene–
fits, financial assets wit hin the scope of lAS 39, noncurren t assets accounted for in accordance with
the fair value mode l in lAS 40, noncurrent assets that are measured at fair value less estimated
point-of-sale costs under lAS 41, and contractual rights under insurance contracts as defined in
IFRS 4.
2, DEFINITIONS OF KEY TERMS (in accordance with IFRS 5)
Held for sale, The carrying amount of a noncurrent asse t will be recovered mainly through
selling the asset rather than through usage.
Disposal group. A group of asset s and possibly some liabilities that an entity intends to dispose
of in a sing le transaction .
2.1
For a noncurrent asset or disposal group to be classified as held for sale, the asset must be
available for immediate sale in its present condi tion and its sale must be highly probable. In addi–
tion , the asse t must be currently being marketed actively at a price that is reasonable in relat ion to
its current fair value.
2.2 The sale should be completed, or expected to be so, within a year from the date of the classi–
fication.
2.3 The actions requ ired to comp lete the planned sale wi ll have been made, and it is unli kely that
the plan will be significa ntly changed or withdrawn.
2.4 For the sale to be highl y probable, management must be committed to selling the asse t and
must be actively looking for a buyer.
2.5 It is possible that the sale may not be completed within one yea r.
2.6 In this case, the asset could still be classified as held for sa le if the delay is caused by eve nts
beyond the entity 's control and the ent ity is still committed to selling the asset.
Case Study
1
Facts
An entity is committed to a plan to sell a building and has started looking for a buyer for that building.
The entity will continue to use the building until another building is completed to house the office staff
located in the building. There is no intention to relocate the office staff until the new building is com–
pleted.
Required
Would the building be classified as held for sale?
Solution
The building will not be classified as held for sale as it is not available for immediate sale.