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Wiley IFRS: Practical Implementation Guide and Workbook
4. SUNDRY POINTS
4.1 Exchanges of noncurrent assets between companies can be treated as held for sale when such
an exchange has a commercia l substance in accordance with lAS 16.
4.2 Occasionally companie s acquire noncurrent assets exclusively with a view to disposal. In
these cases, the noncurrent asset will be classified as held for sale at the date of the acquisition only
if it is anticipated that it will be sold within the one-year peri od and it is highl y prob able that the
held-for-sale criteria will be met within a short period of the acquisition date. Thi s peri od norm ally
will be no more than three months.
4.3 If the criteria for classifying a noncurrent asset as held for sale occ ur after the balance sheet
date, the noncurrent asset should not be shown as held for sale. However, certain information
should be disclosed about the noncurrent assets.
4.4
Operations that are expected to be wound down or abandoned do not meet the definiti on of
held for sale . However, a disposal group that is to be abandoned may meet the definition of a dis–
continued acti vity.
4.5 "Abando nment" means that the noncurrent asset (disposal group) will be used to the end of
its economic life , or the noncurrent asset (disposal group) will be closed rather than sold . Th e
reasoning behind this is because the carrying amount of the noncurrent asset will be reco vered
principally through continued usage.
4.6 A noncurrent asset that has been temporarily taken out of use or service cannot be classified
as being abandoned.
Case
Study
4
Facts
An entity is reorganizing its business activities. In one location, it is stopping the usage of certain
equipment because the demand for the product produced by that equipment has reduced significantly.
The equipment is to be maintained in good working order, and it is expected that it will be brought back
into use if the demand increases. Additionally, the entity intends to close three out of five manufacturing
units. The manufacturing units constitute a major activity of the entity. All the work within the three
units will end during the current year, and as of the year-end all work will have ceased.
Required
How will the piece of equipment and the closure of the manufacturing units be treated in the financial
statements for the current year?
Solution
The equipment will not be treated as abandoned as it will subsequently be brought back into usage. The
manufacturing units will be treated as discontinued operations.
S. MEASUREMENT OF NONCURRENT ASSETS THAT ARE HELD FOR SALE
5.1 Just be fore an asset is initially classified as held for sale, it should be measured in acco rdance
with the applicable IFRS .
5.2 When noncurrent assets or disposal groups are classified as held for sale, they are measured at
the lower of the carrying amount and fair value less costs to sell.
5.3 When the sale is expected to occur in over a year's time, the entity should measure the cost to
sell at its present value. Any increase in the pre sent value of the cost to sell that arises should be
show n in profit and loss as a finan ce cos t.
5.4 Any imp airment loss is reco gni zed in profit or loss on any initial or subsequent write-down of
the asset or disposal group to fair value less cos t to sell.
5.5 Any subsequent increases in fair value less cost to sell of an asset ca n be recogni zed in profit
or loss to the extent that it is not in excess of the cumulative impairment loss that has been
recognized in accordance with IFRS 5 or previously in accordance with lAS 36.