A non-current asset acquired exclusively with a view to its subsequent disposal is classified as held for sale at its acquisition date only if both of the following apply:

• the one-year requirement in IFRS 5 is met (except where a longer period is permitted under IFRS 5); and
• it is highly probable that any criteria in IFRS 5 that have not been met at the acquisition date will be met shortly after the acquisition (usually within three months).

A subsidiary acquired exclusively with a view to resale is also a discontinued operation.

Non-current assets held for distribution to owners

The following criteria must be met before a non-current asset is classified as held for distribution to owners:

• The entity is committed to distribute the asset.
• The asset is available for immediate sale in its present condition.
• Actions to complete the distribution have been initiated.
• The distribution must be expected to be completed within one year from the date of classification.
• It should be unlikely that any significant changes will be made to the plan or that it will be withdrawn.

The probability of shareholders’ approval should be considered as part of the assessment if it is required in the jurisdiction. Guidance on measurement of assets distributed to owners is contained in IFRIC 17.

Non-current assets that are to be abandoned

A non-current asset to be abandoned must not be classified as held for sale, because its carrying amount will not be recovered principally through sale. Assets to be abandoned include:

• non-current assets that are to be used to the end of their economic life; and
• non-current assets that are to be closed.

Assets that are temporarily taken out of use are not to be accounted for as abandoned.

A disposal group to be abandoned can be classified as a discontinued operation on the date when it ceases to be used if the criteria in IFRS 5 are met.

Asset sold for scrap There is a potential anomaly when an asset is to be sold for scrap within a year. It is going to be used for its entire useful economic life, but it will be recovered through sale. Our view is that the asset’s carrying amount will actually be recovered through use and that the sale will be incidental. It does not, therefore, meet the principle set out in IFRS 5. The asset would not be classified as held for sale.

Abandonment and discontinued operations An operation to be abandoned cannot be treated as an asset held for sale before it has actually been abandoned. However, when the operation has actually been abandoned, IFRS 5 requires the operation’s results and cash flows to be presented as discontinued operations (provided that it meets the criteria to qualify as a discontinued operation set out in IFRS 5). The results for the comparative period are re-presented. While an operation to be abandoned might qualify to be treated as discontinued for the purpose of the income statement and cash flow statement, this will only be after the abandonment has been completed. Until that point, the results will be accounted for as normal in those statements, and the assets and liabilities will be included in the normal line items in the balance sheet (because they are not held for sale). After abandonment, balance sheet presentation is not relevant, because the assets and liabilities have been derecognised. The comparative balance sheet is not re-presented in respect of discontinued operations. Even if an operation does not meet the definition of a discontinued operation (because it is being abandoned but the abandonment is not complete), there might be individual non-current assets or disposal groups within that operation that meet the criteria to be classified as held for sale. If this is the case, they should be measured and presented accordingly.

Measurement of non-current assets (or disposal groups) classified as held for sale

Measurement of a non-current asset (or disposal group)

There are three measurement steps for a non-current asset, and four measurement steps for a disposal group, once management of the entity makes a decision to sell or dispose. No further adjustments are required if the fair value less costs to sell is greater than the non-current asset or disposal group’s carrying value. The flow chart below summarises the measurement approach for non-current assets and disposal groups.

A non-current asset held for sale (or held for distribution to owners) is measured at the lower of its:

• carrying amount; and
• fair value less costs to sell (or costs to distribute).

A disposal group classified as held for sale, that meets the definition of a discontinued operation, is also measured according to the above principles.

When the sale of the non-current asset occurs, a further gain or loss might arise.

Transactions with non-controlling interests

If control of a subsidiary is not lost as a result of an exchange, any difference between the fair value of the consideration received (shares in the other entity) and the carrying amount of the assets and liabilities disposed of is recognised in equity. IFRS 10 requires transactions with non-controlling interests to be equity transactions; no gain or loss will, therefore, arise on disposal.

Reduced interest in subsidiary – partial sale of shares A parent purchased a 100% subsidiary for C500,000 at the end of 20X3, when the fair value of the subsidiary’s net assets was C400,000. In December 20X5, the parent sold 40% of its investment in the subsidiary to outside investors for C450,000. The parent still maintains a 60% controlling interest in the subsidiary. The carrying value of the subsidiary’s net assets is C900,000 (including net assets of C800,000 and goodwill of C100,000). Under the economic entity model in IFRS 10, a change in ownership interest that does not result in a loss of control is considered an equity transaction. The identifiable net assets (including goodwill) remain unchanged, and any difference between the amount by which the non-controlling interest is recorded (including the non-controlling interest’s portion of goodwill) and the fair value of the consideration received is recognised directly in equity and attributed to the controlling interest. For disposals that do not result in a loss of control, the change in the non-controlling interest is recorded at its proportionate interest of the carrying value of the subsidiary. The parent’s separate income statement for 20X5 would show a gain of C250,000 on the sale of the investment, calculated as follows: C’000 Sale proceeds 450 Less: cost of investment in subsidiary (C500,000 × 40%) (200) Gain on sale in the parent’s financial statements 250 As discussed above, the group’s consolidated income statement for 20X5 would show no gain on the sale of the interest in the subsidiary. Instead, the difference between the fair value of the consideration received and the amount recorded in respect of the non-controlling interest is recognised directly in equity: C’000 Sale proceeds 450 Less: Recognition of non-controlling interest (C900,000 × 40%) 360 90 The entry recognised in the consolidated accounts under IFRS 10 is: C’000 C’000 Dr Cash 450 Cr Non-controlling interest (C900 × 40%) 360 Cr Equity 90 The difference between the gain in the parent’s income statement and the increase reported in the group’s consolidated equity is C160,000. This difference represents the share of post-acquisition profits retained in the subsidiary of C160,000 (that is, (C900,000 − C500,000) × 40%) that have been reported in the group’s income statement up to the date of sale. The non-controlling interest immediately after the disposal will be 40% of the net carrying value of the subsidiary’s net assets, including goodwill, in the consolidated balance sheet of C900,000 (that is, C360,000).

Reduced interest in subsidiary – issuance of additional shares by subsidiary On 31 December 20X1, a parent owns 90 shares (90%) of a subsidiary. On 1 January 20X2, the subsidiary sells an additional 20 shares to an unrelated party for C200,000 in cash. Assume the following facts on December 31 and January 1 (C’s in millions): 31 December 20X1 (pre-sale) 1 January 20X2 (post-sale) Total shares outstanding – subsidiary 100 shares 120 shares Parent ownership percentage in subsidiary 90% (1) 75% (2) Parent basis in subsidiary C370,000 (3) C458,000 (4) Subsidiary net equity C411,000 C611,000 (1) 90 shares divided by 100 shares outstanding (2) 90 shares divided by 120 shares outstanding (3) Subsidiary’s net equity x 90% (4) Subsidiary’s net equity x 75% For purposes of this example, it is assumed that there is no basis difference between the parent’s investment in the subsidiary and the Subsidiary’s net equity. The parent’s ownership percentage of the subsidiary has been diluted from 90% to 75%. This change in ownership interest that does not result in a change of control and, therefore, is considered an equity transaction. Any difference between the amount by which the carrying value of the parent’s basis in the subsidiary would be adjusted and the fair value of the consideration received recognized directly in equity and attributed to the controlling interest in accordance with IFRS 10 paragraph B96. In its group’s consolidated accounts, the following journal entry would be recorded: C’000 C’000 Dr. Cash (1) 200 Cr. Equity (2) 88 Cr. Non-controlling interest (3) 112 (1) Cash received for the 20 shares sold by the subsidiary to the unrelated investor (2) The parent’s share of the fair value of the consideration received (C200,000 x 75%) less the change in the parent’s basis in the subsidiary (C411,000 x (90% – 75%)) (3) The change in the recorded amount of NCI represents: C’000 NCI’s share of the fair value of the consideration received (CU200,000 x 25%) 50 Change in NCI’s basis in Subsidiary Z (CU411,000 x 15%) 62 112 After this journal entry NCI in the subsidiary is C112,000 + C411,000 – 370,000 = C153,000.

Amounts recognised in equity for changes in ownership that do not result in a change in control are not recycled to profit or loss on a loss of control. Only amounts recognised in other comprehensive income for which recycling is permitted (such as reserves related to FVOCI debt securities and foreign currency translation) are reclassified to profit and loss.

Inter-company transactions in discontinued operations

A disposal group will usually continue to operate during the period when it meets the held for sale criteria. Transactions might occur between the disposal group and other businesses within the group. Normal consolidation rules must be followed, and all intra-group balances, transactions, income and expenses should be eliminated in full. This can present challenges, particularly where the disposal group is a discontinued operation.

Detailed discussion on inter-company transactions in discontinued operations Inter-company balances will need to be eliminated on consolidation where cash has been passed between the disposal group and other businesses in the group through inter-company accounts. These transfers of cash to and from the disposal group through the inter-company account will have an impact on the carrying amount shown in the consolidated financial statements. However, this does not mean that the fair value of the disposal group has changed. The movements arise as a result of the elimination of the inter-company balances. Inter-company transactions might also arise where goods are sold from the disposal group to the continuing business, or vice versa. In these circumstances, the same principle should be applied: the inter-company balances and transactions should be eliminated in full. Inter-company income and expenses (For example, interest or dividends) also need to be eliminated. This is straightforward where an entity is classified as held for sale after it has formed part of the consolidated trading group. Where an entity is acquired exclusively with a view to resale, and so it has only ever been held in the consolidated financial statements under IFRS 5, the situation is more complicated.

Elimination of inter-company loan balances Entity P consists of a number of businesses, including entity T. Entity T meets the criteria for held for sale. On initial classification under IFRS 5, entity T’s carrying amount was C5 million, which was lower than fair value less costs to sell. At the next period end, there has been no change in the assets or liabilities of the disposal group, apart from an increase in cash as a result of a cash loan of C1 million from entity P. The net assets of disposal group entity T are still C5 million, because the increase in cash is offset by an equal intercompany creditor. The lower of the carrying amount and fair value less costs to sell of disposal group entity T is still C5 million. On consolidation, the following entry will need to be recorded: Dr Inter-company loan from entity P (in entity T) C1 million                Cr Inter-company loan to entity T (in entity P) C1 million In the group’s consolidated financial statements, entity T’s carrying amount will be C6 million, because the C1 million inter-company liability has been eliminated.

Sale of goods from disposal group to continuing group Entity A prepares consolidated financial statements, incorporating all of its subsidiaries, including entity C. Entity C meets the definition of a disposal group under IFRS 5. During the period between initial classification as held for sale and the balance sheet date, entity C sells some goods to entity A. Entity C bought the goods for C100 and sold them to entity A for C120. Entity A has subsequently sold them to a third party for C150. Entity A paid for the goods from entity C via its inter-company account rather than with cash. On consolidation, the inter-company balances will need to be eliminated. This elimination will decrease the carrying amount of entity C, because the intercompany receivable from entity A will be eliminated. This decrease in carrying amount of entity C does not represent an impairment of the disposal group, but it does represent the elimination of the inter-company receivable.

Where should inter-company transactions be eliminated? The IFRIC observed that not eliminating intra-group transactions would be inconsistent with the elimination requirements of IFRS 10. In the absence of explicit guidance, an entity should select an accounting policy and apply it consistently. Although IFRS 5 is silent on this matter, regulators in some countries might have specific views on the accounting and presentation of inter-company transactions between continuing and discontinued operations. When considering the guidance below, such requirements of relevant regulators should be taken into consideration, if applicable. In our view, an entity can choose whether to: ·        eliminate inter-company transactions without any adjustments (that is, within continuing and discontinued operations); ·        eliminate the inter-company transactions against the discontinued operation; or ·        look at the situation post-disposal and determine whether it is more appropriate to eliminate against the discontinued operation or the continuing business. The IFRIC observed that, depending on particular facts and circumstances, an entity might have to provide additional disclosures in order to enable users to evaluate the financial effects of discontinued operations. In this case, a supplementary presentation of inter-company transactions for discontinued operations could be made in the notes. If the entity chooses to look at the situation post-disposal, it should determine whether the arrangement between the continuing and discontinuing operations will continue subsequent to the disposal. If the arrangement is expected to continue, it would be appropriate to record the sales and costs in continuing operations and, therefore, to record the elimination entries in discontinued operations. This will give an indication of the results of the continuing business on an ongoing basis. The results of the discontinued operation will include only those costs and revenues that will be eliminated from the group on disposal. If it is unlikely that the arrangement will continue, the elimination entries should be recorded against the continuing operations. The results of the discontinued operation will include the sales and costs that will no longer accrue to the group after the disposal. This is illustrated in the flow chart below:

Neither IFRS 5 nor IFRS 10 specifies the treatment for the elimination of inter-company balances between continuing and discontinued operations. Different approaches can be followed in eliminating these transactions, the key principle being that elimination must still occur.

Transactions between continuing and discontinued operations (1) A group is disposing of operation A, which qualifies under IFRS 5 to be treated as discontinued. It also has operations B and C, which sell raw materials to operation A at market prices. The value of goods sold by operations B and C to operation A in the year was C1 million (cost to produce: C0.7 million). Operation A uses these goods in its manufacturing process and has external turnover of C1.5 million generated from sales of finished goods. The group expects the sales to operation A to continue in the future. How should the sales from operations B and C to operation A be accounted for? The group should book the elimination entries against the discontinued operation if it has made this policy choice of assessing whether the arrangement will continue in the future. Because the arrangement will continue in the future, the results of operations B and C should include the amount that will become external revenue in subsequent periods. The revenue that should be presented as discontinued is the remaining C0.5 million, because this is the revenue that will no longer accrue to the group following the disposal.

Transactions between continuing and discontinued operations (2) We believe that each of the options below could result in a meaningful presentation. However, in making an accounting policy choice, an entity might need to consider local regulatory restrictions which might be more specific than, or differ from, the approaches below: A discontinued B + C continuing Total Intercompany elimination Consolidated FS (if no discontinued operations) Sales 11,500 21,000 32,500 (1,000) 31,500 Cost of sales (9,500) (15,700) (25,200) 1,000 (24,200) Total 2,000 5,300 7,300 – 7,300   Elimination in discontinued operations Elimination in continuing operations Sales 21,000 20,000 [21,000 – 1,000] Cost of sales (15,700) (15,000) [15,700 – 700] Profit from continuing operations 5,300 5,000 Profit from discontinued operations 2,000 2,300 [2,000 + 1,000 – 700] Profit for the period 7,300 7,300 Note: Discontinued operations Revenue 10,500 11,500 [11,500 – 1,000] Expenses (8,500) (9,200) [9,500 – 1,000] [9,500 – 300] Profit of discontinued operations 2,000 2,300

Recognition of impairment losses

Treatment of lease penalty for costs to sell Entity A sells a major line of business. It leases a building that is used exclusively by the line of business to be sold. The buyer will not take on the lease arrangement, leaving entity A with the associated cost of subletting (at lower than the contract rate) or paying a penalty to terminate the lease early. Although this expense would have been avoided if the disposal had not taken place, the costs are not essential to the sale itself and, therefore, should not be included in costs to sell.

Recognition of impairment losses

An impairment loss is recognised on classification as held for sale if the fair value less costs to sell is lower than the carrying value of the non-current asset or disposal group. The impairment loss forms part of continuing operations, unless the non-current asset or disposal group is a discontinued operation.

The impairment loss of a disposal group reduces the carrying amount of non-current assets within IFRS 5’s measurement scope. The impairment is allocated in the following order:

• First, reduce the carrying amount of any goodwill of the disposal group.
• Then the impairment is allocated to the other assets of the disposal group on a pro rata basis.
• A reversal of impairment is allocated on the same basis, except that impairment of goodwill cannot be reversed.
• Normally, the carrying amount of an asset cannot be reduced below the highest of fair value less costs to sell, value in use and zero, in accordance with IAS 36. IFRS 5 does not incorporate this guidance and, effectively, any asset within the measurement scope of IFRS 5 can be written down to nil.

Costs to sell (or distribute) are incremental costs directly attributable to the disposal of a non-current asset, and they exclude finance costs and income tax. Costs must be incremental; internal costs, although they are not excluded from the definition, are not often incremental.

Detailed discussion on deferred taxes in a disposal group held for sale The question arises as to whether deferred taxes should be classified as part of the held for sale disposal group. Determining whether the deferred taxes are included in the disposal group depends on whether the buyer will be assuming those deferred taxes. Where a sale is an asset transaction (that is, a sale of the net assets, rather than a sale of the investment) and the tax bases are stepped up to the new carrying amount, the deferred taxes are not assumed by the buyer. Instead, the seller will recover or settle the deferred taxes as part of the sale transaction, and so the deferred taxes are not included in the disposal group. In a sale of the shares in an investment, the deferred taxes associated with the individual assets and liabilities will usually be assumed by the buyer, because the tax bases of the individual assets and liabilities will carry over to the buyer. The deferred taxes in this situation relating to the individual assets and liabilities are included in the disposal group. When a sale of shares occurs, deferred taxes might also need to be provided for the difference between the carrying amount of the disposal group’s net assets and the tax base of the investment (that is, outside basis difference), in addition to the deferred taxes associated with the individual assets and liabilities. These deferred taxes will be settled or recovered by the seller, and so they are not included in the disposal group. Deferred tax might still be recognised when a non-current asset or disposal group is remeasured under IFRS 5. However, any tax arising on the disposal itself would not be accounted for as part of the fair value less costs to sell measurement exercise. If a tax expense or refund will occur on the disposal of a non-current asset or disposal group, this is not part of the cost of selling the asset or disposal group. It is a separate expense that should be accounted for as normal under IAS 12. Where a disposal group meets the definition of a discontinued operation, any tax generated on the disposal is presented within discontinued operations.

Can costs of disposal be carried forward on the balance sheet? The costs of disposal should not be carried forward on the balance sheet to match against any profit on sale in the following year, unless they meet the definition of an asset. All estimated costs of disposal should be taken into account on initial remeasurement under IFRS 5.

A newly acquired asset, that meets the ‘held for sale’ criteria, also applies the measurement guidance. Any such asset acquired as part of a business combination is measured at fair value less costs to sell, instead of fair value as required by IFRS 3.

Costs to sell are measured at their present value where the sale is expected to occur in more than one year. The unwinding of the discount should be presented in the income statement as a financing cost.

Subsequent measurement of non-current assets held for sale and disposal groups

The IFRS 5 measurement of assets or disposal groups that meet the held for sale criteria are updated as of each reporting date until disposal, or until the criteria are no longer met.

Updating the IFRS 5 measurement of a disposal group requires the following:

• measure the carrying amounts of current assets, current liabilities, non-current assets and non-current liabilities outside the measurement scope of IFRS 5, in accordance with the relevant IFRS; and
• measure the fair value less cost to dispose of the disposal group.

Contingent liability in disposal group leading to an impairment loss Entity P discloses, in respect of business Q, a significant contingent liability in respect of a pending court case that entity P believes is likely to be won. Entity P decides to sell business Q, and it meets the conditions to be classified as held for sale. The fair value less costs to sell of business Q will take into account the fair value of the contingent liability that has not been recognised in the books of entity P. The contingent liability will not be recognised as a provision under IAS 37. The overall fair value of the business Q disposal group will be affected by the market’s view of the fair value of the contingent liability. In this case, the fair value less costs to sell of business Q will be lower than the carrying value of the individual assets. IFRS 5 requires an impairment loss to be recognised for any initial write-down of the asset to fair value less costs to sell, to the extent that it has not been recognised. The impairment loss would be accounted for against business Q’s goodwill first and then pro rata against the other assets of business Q.

Recognition of impairment reversals

Any subsequent increase in fair value less costs to sell of a non-current asset held for sale is recognised only to the extent of the cumulative impairment loss that has been recognised in accordance with IFRS 5 or, previously, in accordance with IAS 36.

If the fair value less costs to sell of the disposal group increases, the increase can only be recognised:

• to the extent that it has not been recognised when assets and liabilities not under IFRS 5’s measurement scope have been remeasured; but

• to the extent that it does not relate to the reversal of any impairment of goodwill; and

• to the extent that it is not in excess of the cumulative impairment loss that has been recognised either in accordance with IFRS 5 or previously recognised under IAS 36 in respect of the assets within IFRS 5’s measurement requirements.

Disposal group with negative fair value less costs to sell The impairment loss recognised for a disposal group should reduce the carrying amount of the non-current assets in a disposal group that are within the scope of its measurement requirements. Where the fair value less costs to sell is negative, applying IFRS 5 will not result in the recognition of a liability, since the carrying amount of the assets within the disposal group cannot be reduced below nil. The guidance in IAS 37 determines whether a provision is recognised.

A non-current asset is not depreciated or amortised while it is classified as held for sale or part of a disposal group that is held for sale. However, all other costs and expenses attributable to a disposal group held for sale continue to be recognised.

Negative ‘sales proceeds’ expected on disposal of a disposal group

IFRS 5 states that “an entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use”. IFRS 5 clarifies that “an entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned”. IFRS 5 is silent, however, regarding whether it is acceptable to classify a disposal group as held for sale when an entity will have to pay a third party to accept that disposal group. This scenario can arise when the liabilities of the disposal group exceed its assets.

It is appropriate for such a disposal group to be classified as held for sale in some circumstances, but it is necessary to assess the substance of the transaction.

Neither ‘sale’ nor ‘abandonment’ is defined in IFRS Standards. If the transaction under consideration involves a third party and does not result in the disposal group being dissolved or liquidated, the disposal group is unlikely to be considered as ‘abandoned’. Accordingly, the disposal group will be classified as held for sale if it meets the criteria in IFRS 5.

However, when an entity has to pay a third party to accept a disposal group that will subsequently be dissolved or liquidated, classification as held for sale may not be appropriate. An entity cannot ‘convert’ an asset or a group of assets that is to be abandoned to one that qualifies as held for sale simply by paying a third party to take over the entity’s decommissioning, rehabilitation or similar obligations. It is necessary to look at the substance of the transaction and, rather than examining the buyer’s future intentions regarding the use of the assets (which might not be known to the seller), the focus should be on an evaluation from the seller’s viewpoint.

The seller should consider whether there has been a transfer of all risks and rewards (including decommissioning and rehabilitation obligations), or whether the substance of the transaction is that the seller has effectively contracted a third party to scrap the asset (or assets). The ‘sale’ of a very limited number of assets plus a decommissioning liability with negative net proceeds from the transaction could indicate that the latter is the case, but a careful assessment is required of the relevant facts and circumstances.

Changes to a plan of sale or distribution

Entities classifying non-current assets or disposal groups as held for sale need to monitor the conditions in IFRS 5. If they are not met at any point, the non-current asset or disposal group ceases to be classified as held for sale. For example, if an entity is no longer actively marketing an asset or disposal group, it will cease to qualify for classification as held for sale.

Negotiations for sale fall through post year end In October, an entity with a December year-end decides to sell one of its subsidiaries. The board begins to actively market the subsidiary and negotiate with potential buyers. At 31 December, management considers it highly probable that the sale will be completed within 12 months. However, in February, negotiations fall though and the entity decides to wind up the subsidiary instead of selling it. The subsidiary meets the criteria to be classified as held for sale at the year end. The decision to wind up the company subsequent to the year-end does not affect the conditions that existed at the year-end, and management should not use hindsight when classifying assets and liabilities. However, after February the held for sale classification would no longer apply and, in the subsequent period, the subsidiary should be reclassified as held for use.

How should the one-year criteria be assessed subsequently? The conditions for whether an asset or disposal group meets the held for sale criteria are not re-assessed as if the asset or disposal group were newly qualified at each assessment date (that is, assessing whether the asset will be sold within a year of that date). It means re-assessing the time period as it applied at the date of initial classification as held for sale. There is some flexibility to take account of changing circumstances. The standard does allow, in certain circumstances, the condition that the sale should be expected to be recorded as completed within one year of classification as held for sale to be extended and the asset to retain its held for sale classification.

The requirements for assets held for distribution are similar to those existing for assets held for sale. If an asset (or disposal group) held for distribution no longer meets the ‘held for sale’ criteria, an entity ceases to classify such an asset (or disposal group) as held for distribution.

Where an entity changes its plan to sell an asset to a plan to distribute that asset to owners, or vice versa, the change in itself does not trigger the requirements of IFRS 5 to cease classifying the asset as held for sale or held for distribution. In such a case, entities should continue to apply the classification, presentation and measurement requirements of IFRS 5 applicable to a non-current asset that is classified as held for sale or a non-current asset that is classified as held for distribution.

A non-current asset that is no longer classified as held for sale, or is no longer part of a disposal group held for sale, is measured at the lower of:

• the carrying amount before it was classified as held for sale, adjusted for depreciation, amortisation and revaluations that would have been recognised if the asset had not been classified as held for sale; and
• the recoverable amount (as defined in IAS 36) at the date of the decision not to sell; if the asset is part of a cash generating unit (‘CGU’), any impairment loss arising on that CGU is allocated to the non-current asset; an impairment review under IAS 36 is required.

Any adjustments to the carrying amount, when the non-current asset ceases to be classified as held for sale, is included in profit or loss from continuing operations in the period that the ‘held for sale’ criteria cease to be met. In the comparative period, the balance sheet amounts will not move from the IFRS 5 caption of ‘held for sale’ and their measurement will not be revised.

If the non-current asset is a subsidiary, joint venture, joint operation or associate, the financial statements are amended accordingly from the period of initial classification as held for sale. Any adjustment arising from the change is also included in profit or loss from continuing operations, in the same line item where any other gain or loss from remeasurement is included.

IASB and IFRS IC discussions on retrospective restatement for subsidiaries, associates and joint ventures The IFRS IC received a request to clarify how to apply the presentation requirements in IFRS 5. It requires the effects of a remeasurement (on ceasing to be classified as held for sale) of a noncurrent asset to be recognised in profit or loss in the current period. Paragraph 28 also requires financial statements, for the periods since classification as held for sale or as held for distribution to owners, to be ‘amended accordingly’ if the disposal group or non-current asset that ceases to be classified as held for sale or as held for distribution to owners is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate. The first issue relates to whether or not a retrospective amendment (as required by IFRS 5) applies only to measurement, or whether it also applies to presentation, with respect to a change of a sale plan involving a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate. The Interpretations Committee observed that the requirements in IFRS 5 are not clear on whether the term ‘amended accordingly’ in paragraph 28 of IFRS 5 refers only to measurement, or whether it also refers to presentation, where there has been a change to a sale plan. The second issue relates to a situation in which a disposal group, that consists of both a subsidiary and other non-current asset, ceases to be classified as held for sale. In such a situation, should an entity recognise the remeasurement adjustments relating to the subsidiary and the other non-current assets in different accounting periods, and should any amendment apply to presentation as well as to measurement? The Interpretations Committee noted that the requirements are inconsistent; this is because, where there has been a change to a sale plan, IFRS 5 requires the effects of a remeasurement of a disposal group that is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate, to be recognised retrospectively, whereas it requires the effects of a remeasurement of non-current assets to be recognised in the current period. Because of the number and variety of unresolved issues, the Interpretations Committee concluded that a broad-scope project on IFRS 5 might be warranted. Consequently, the Interpretations Committee decided not to add the issue to its agenda.

The following applies where non-current assets are no longer classified as held for sale:

• If an entity removes an individual asset from a disposal group classified as held for sale, the remaining assets continue to be classified and measured as such if the group continues to meet the ‘held for sale’ criteria.
• If the group no longer meets the ‘held for sale’ criteria, any non-current assets that individually meet the ‘held for sale’ criteria are remeasured in accordance with the IFRS 5 measurement requirements.
• Any asset that no longer meets the ‘held for sale’ criteria is remeasured in accordance with IFRS 5.