IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations_upd

8/13/2019 IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations_upd

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for Bank Accounting Professionals

IFRS 5 Non-current Assets held for sale and Discontinued O erations

!his Pro"ect is funded #$ %&

'''(#anks)ifrs(ru
http://www.accountingreform.ru/http://www.accountingreform.ru/


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Non-current Assets Held for Sale and Discontinued Operations

PR%FA*%These workbooks are an update of those originally written by the projectteam of the uropean !nion funded project Accounting "eform ## in the"ussian $ederation and re%ised by the project team of the uropean !nionfunded project& #mplementation of Accounting "eform in the "ussian$ederation'This %ersion has been produced by the uropean !nion funded project!ransition to IFRS in the Banking Sector(

The workbooks co%er %arious concepts of #$"S based accounting' Theyare intended to be practical self-instruction aids that professionalaccountants can use to upgrade their knowledge& understanding and skills'

The purpose of this %ersion is to help bank accountants in the use of #$"S'

ach workbook is a self-standing short course designed for appro(imatelyof three hours of study'

The members of the project team were contributed by )w* +oscow& $,+oscow& and uropean Sa%ings ,ank .roup ,russels' Although theworkbooks are part of a series& each one is independent of the others'

A basic knowledge of accounting is assumed but if any additionalknowledge is re/uired this is mentioned at the beginning of the section'

ach workbook is a combination of #nformation and Self Test 0uestionsand Answers'

$urther "eading "eferences are also included'

The %olumes within each series are described in detail and a%ailable for

download from the project web site'The copyright of the material contained in each workbook belongs to theuropean !nion and according to its policy may be used free of charge forany non-commercial purpose'

The project team would like to e(press thanks to those who ha%econtributed their time and thoughts to the content of the workbooks' #nparticular1

The uropean !nion Delegation& +oscow

The ,ank of "ussia& +oscow

Note1 +aterial from the following )ricewaterhouse*oopers publication hasbeen used in this workbook1

Applying #$"S

*ontact

'''(#anks)ifrs(ru 2


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+oscow& "ussia& September 2334 5!pdated6

PR%FA*%(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((()

+( NON-*&RR%N! ASS%!S ,% D FOR SA % AND DIS*ON!IN&%D OP%RA!IONS - IN!ROD&*!ION((((((((((((((((((((((((((((((((((((.

)( IFRS 5 - I/PA*! FOR BAN0S((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((5

.( * ASSIFI*A!ION OF NON-*&RR%N! ASS%!S OR DISPOSA 1RO&PS AS ,% D FOR SA % (((((((((((((((((((((((((((((((((((((((((+)

2( /%AS&R%/%N! OF NON-*&RR%N! ASS%!S OR DISPOSA 1RO&PS * ASSIFI%D AS ,% D FOR SA % ((((((((((((((((((((+.

5( DIS*ON!IN&%D OP%RA!IONS((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((+3

4( PR%S%N!A!ION AND DIS* OS&R% ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((+

3( /& !IP % *,OI*% 6&%S!IONS((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((())

( ANS7%RS !O /& !IP % *,OI*% 6&%S!IONS(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((().+( Non-current Assets held for sale and

Discontinued O erations - IntroductionO8%R8I%7

AI/

'''(#anks)ifrs(ru

e-mail websites9etlana(de:irel;ru( 'c(co: '''(#anks)ifrs(ru

Tel' $a('7 4 89: 442-439; 7 4 89: 442-4398


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The aim of this workbook is to assist the indi%idual in understanding #$"S :Non-current Assets =held for sale> and Discontinued Operations accordingto #$"S'

Non-current Assets =held for sale> and Discontinued Operations is thesubject of #$"S : and supersedes #AS s consideration of the !'S' based $AS,Statement No' ;88 which addresses three areas1

5i6 the classification& measurement and presentation of assets=held for sale>@

5ii6 the classification and presentation of discontinued operations@and

5iii6 the impairment of long-li%ed assets to be held and used'

#$"S : achie%es substantial con%ergence with the re/uirements of S$AS;88 relating to assets =held for sale>& the timing of the classification ofoperations as discontinued and the presentation of such operations but not5iii6 impairment of long-li%ed assets 5see #AS < workbook6'

/ain features of IFRS 5

#$"S :1; uses the classification ==held for sale>>'

2 introduces the concept of a =disposal group>& being a group of netassets 5assets and liabilities6 to be disposed of& together as a group&in a single transaction'

< specifies that assets or disposal groups that are =held for sale> arecarried at the lower of1carrying amount and=fair %alue& less costs to sell>'

8 specifies that an asset classified as =held for sale>& or included withina disposal group that is =held for sale>& is not depreciated'

: classifies an operation as discontinued at the date the operationmeets the criteria to be classified as held for sale or when the entityhas disposed of the operation'

' specifies that =held for sale> assets and the net assets included withina =held for sale> disposal group& are presented separately& on theface of the balance sheet'

4' specifies that the results of discontinued operations are to be shownseparately& on the face of the income statement'

B' prohibits retroacti%e classification of an operation as discontinued'

9' supersedes #AS


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#$"S : classifies an operation as =discontinued>& at the date the operationcan be classified as =held for sale>& or when the bank has disposed of theoperation'

OB and

measured at the lower of1 carrying amount and

=fair %alue& less costs to sell>and depreciation on such assets to cease@

ii assets that meet the criteria are classified as =held for sale> are to

be presented separately& on the face of the balance sheet' Theresults of discontinued operations are presented separately in theincome statement'

)( IFRS 5 - I: act for Banks#$"S : has a specific rele%ance to banks in being used to account forassets recei%ed in e(change for loans when taking possession of collateral'

CA+) - taking possession of real estate due to loan default'

Eou loan money to a firm building flats' The firm pro%ides the land and the flatsas collateral for the loan' Due to fraud& the firm does not ha%e enough money tocomplete the flats and is in breach of the conditions of the loan'

Eou take possession of the land and the flats' Eou intend to sell them& but need

to complete construction in order to reco%er the %alue of the loan and the unpaidinterest' Eou account for them under #$"S : F non-current assets held for sale'

CA+) - Assets ac/uired in e(change for loans - HS,* plc Annual "eport233:'Non-financial assets ac/uired in e(change for loans in order to achie%e anorderly realisation are recorded as assets held for sale and reported in =Other

assets>'

!he asset ac=uired is recorded at the lo'er of its fair 9alue >less costs tosell? and the carr$ing a:ount of the loan >net of i: air:ent allo'ance? atthe date of e@change( No depreciation is pro%ided in respect of assets held forsale'

Any subse/uent write-down of the ac/uired asset to fair %alue less costs to sellis recorded as an impairment loss and included in the income statement' Anysubse/uent increase in the fair %alue less costs to sell& to the e(tent this doesnot e(ceed the cumulati%e impairment loss& is recognised in the incomestatement'

This use of #$"S : is to distinguish acti%ities 5and the non-current assetsin%ol%ed6 that are incidental to the bank>s main acti%ity of banking& and areof a temporary nature' 5#f a bank is continuously in%ol%ed in theconstruction industry& in a more acti%e role than only making loans& theseacti%ities would be considered part of its normal trading'6 The bank maythen be subject to #AS ;;'

CA+) - Disposal group - ac/uired with a %iew for subse/uent disposal FH,OS plc 233 financial statements'The assets 5;&


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assets and not distinguished& unless they comprise a disposal group 5seebelow6'

$inancial instruments are measured as re/uired by #AS customer group segment'L

,anks will also use #$"S : for its discontinued operations1

(ample - Assets classified as held for sale and associated liabilities -Nationwide Annual "eport And Accounts 2334'

On 4 $ebruary 2334 the .roup announced the proposed sale of its life&in%estment and pensions subsidiaries& Nationwide ife imited and Nationwide!nit Trust +anagers imited to egal .eneral'

*onse/uently& the assets and liabilities of these undertakings are disclosedseparately as re/uired by #$"S :'

The proceeds of disposal are e(pected to e(ceed the carrying %alue of therelated net assets and& accordingly& no losses ha%e been recognised'

The major assets and liabilities of these undertakings are as follows1

,alance sheet 2334 233Mm Mm

Assets

oans and ad%ances to banks ;9B'B -#nsurance assets at fair %alue ;&939' -Other assets 2BB'2 -Total assets held for sale 2&


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#n other cases& discontinued businesses may be considered not to bematerial and they are not shown separately& as in the following twoe(amples1

(ample F )rofit on sale and closure of businesses - loyds TS, .roup 233financial statements'

JThe businesses sold in 233: were not material to the .roup& and conse/uentlythey ha%e not been treated as discontinued operations'J

and

(ample F discontinued businessesF ,arclays plc 233 financial statements'JHead office functions and other operations comprises discontinued businessesin transition'J

'''(#anks)ifrs(ru 4


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Pro ert$ t$ e - different accounting treat:ent a lied to ro erties under IFRS de ending on their current and future uses and their o'nershiStandard Standard Na:e 8aluation

Owner-occupied property #AS ; )roperty& plant and e/uipment5see also #AS 23 .o%ernment grants6

*ost or re%aluation'

)roperty under construction 5includingin%estment property under construction6

#AS ; )roperty& plant and e/uipment5see also #AS 2< ,orrowing costs6

*ost'

)roperty ac/uired in an e(change ofassets

#AS ; )roperty& plant and e/uipment $air %alue or the carrying amount of the assetstraded e(changed'

#n%estment property #AS 83 #n%estment property *ost or fair %alue'#n%estment property being rede%elopedfor continuing use as in%estment property'

#AS 83 #n%estment property *ost or fair %alue'

#n%estment property held for sale withoutde%elopment 5unless it meets the criteriaof #$"S : F see below6'

#AS 83 #n%estment property *ost or fair %alue'

)roperty held under an operating leaseclassified as an in%estment property

#AS 83 #n%estment property $air %alue 5accounted for as a finance lease under #AS;46'

)roperty held under a finance lease #AS ;4 eases' Owner-occupied #AS ; &

#n%estment property #AS 83'

The lower of fair %alue and the present %alue of the

minimum lease payments')roperty held under an operating lease Fowner -occupied

#AS ;4 eases easing costs e(pensed'

)roperty lease to another party under afinance lease

#AS ;4 eases Account recei%able e/ual to the net in%estment in thelease'

)roperty sale and leaseback #AS ;4 eases As operating lease or finance lease& as appropriateTrading properties F property 5includingin%estment property6 intended for sale inthe normal course of business or beingbuilt or de%eloped for that purpose

#AS 2 #n%entories 5)roperties held for sale that meet thecriteria of #$"S : should be recorded according to#$"S : F see below' These are generally not in thenormal course of business'6

ower of cost and net realisable %alue'

Pro ert$ held for sale or included in adis osal grou that is held for sale(

IFRS 5 Non-current assets held for sale anddiscontinued o erations

o'er of carr$ing a:ount and fair 9alue less coststo sell(

Assets recei9ed in e@change for loans>taking ossession of collateral?

IFRS 5

#AS ;

Non-current assets held for sale anddiscontinued o erations)roperty& plant and e/uipment 5see )ropertyac/uired in an e(change of assets abo%e6

o'er of fair 9alue less costs to sell and carr$inga:ount of the loan net of i: air:ent at the date ofe@change(>see ,SB* lc Annual Re ort ) 5 age )23?

)roperty pro%ided as part of aconstruction contract

#AS ;; *onstruction contracts Stage of contract completion or cost'

$uture costs of dismantling& remo%al andsite restoration'

#AS


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'''(#anks)ifrs(ru 9


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The calculations and presentations of Non-current Assets =held for sale> andDiscontinued Operations are intended to help the reader of f inancial statementsto distinguish between1

5i6 the results of acti%ities that will continue to be part of the bank& andthe assets and liabilities that support them& and

5ii6 the results of acti%ities that ha%e ceased 5or will soon cease6 to bepart of the bank and the assets and liabilities that will no longer bepart of the bank'

S*OP%

#$"S : is one of se%eral standards that apply to property' The table abo%eidentifies #$"S : uses and %aluations of property' #n this conte(t& #$"S : is closeto #AS 2 5#n%entories6'

#AS 2 is used when trading properties is the main business of a bank& and theproperties are being sold in the normal course of business'

#$"S : is used when the sale of property is not the main business' #n the case offinancial institutions& their normal business is to pro%ide loans& though in somecases& the bank will recei%e assets that were collateral for the loans'

#$"S : applies to all non-current assets and to all disposal groups& e(cept forthose assets listed below& which continue to be measured in accordance with theStandard noted'

Sometimes& a bank disposes of a group of net assets in a single transaction' Thisis known as a dis osal grou ' A disposal group that was part of a cash-generating unit becomes a separate cash-generating unit'

The group may include current assets& current liabilities and assets e(cludedfrom the re/uirements of #$"S :'

#f a non-current asset is part of a disposal group& #$"S : applies to the group asa whole' The group is measured at the lo'er of 1- its carrying amount@ and-=fair %alue& less costs to sell>'

#$"S : does not apply to the following assets& which are co%ered by theStandards listed& either as indi%idual assets or as part of a disposal group1

i deferred ta( assets - #AS ;2 #ncome Ta(es' ii assets arising from employee benefits - #AS ;9 Staff ,enefits'

iii financial assets within the scope of #AS & in accordance with #AS 8; Agriculture'

%i contractual rights under insurance contracts as defined in #$"S 8#nsurance *ontracts'

'''(#anks)ifrs(ru ;3

Notes to the ta#le on the re9ious age(

Note ;1 ?here an asset is re9alued & increases in carrying amounts abo%e costare recorded as re9aluation sur lus &in e=uit$ '

!sing fair 9alues & all changes in fair %alue are recorded in the inco:estate:ent '"eductions below cost are recorded in the income statement under both

methods'Note 2' #n the cases where the asset is subject to cost or re%aluations& the

carrying %alue will be reduced by accumulated depreciation andaccumulated impairment 5see #AS < workbook6'

The table abo%e identifies the different accounting treatment applied toproperties under #$"S depending on their current and future uses and theirownership'

?orkbooks are a%ailable on our website on each standard that e(plain eachaccounting treatment with e(amples'
http://www.banks2ifrs.ru/http://www.banks2ifrs.ru/


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Defined ter:s

cash-generating unit The smallest identifiable group of assets thatgenerates cash inflows& independent of thecash inflows from other assets'

co: onent of a #ank Operations and cash flows that can be clearly

distinguished operationally and for financialreporting& from the rest of the bank'

costs to sell The incremental costs& directl$ attri#uta#leto the dis osal of an asset or dis osalgrou & e(cluding finance costs and incometa( e(pense'

current asset An asset that satisfies any of the followingcriteria1 i i t is e(pected to be realised in cashor is intended for sale or consumption in thebank>s normal operating cycle@

ii it is held for the purpose of beingtraded@ iii it is e(pected to be realised withintwel%e months after the balance sheet date@or i% it is cash or a cash e/ui%alent assetthat can be used within twel%e months afterthe balance sheet date'

discontinued o eration A co: onent of a #ank that either has beendisposed of& or is classified as =held for sale>and1i represents a separate major line of

business or geographical area of operations&

ii is part of a single co-ordinated plan todispose of a separate major line of businessor geographical area of operations or

iii is a subsidiary& ac/uired e(clusi%elywith a %iew to resale'

dis osal grou A group of net assets to be disposed of bysale or otherwise together as a group& in asingle transaction' #t may include goodwill'

date of classification Date of classification of long term assets ordisposal group as held for sale'

fair 9alue The amount for which an asset could bee(changed& or a liability settled& betweenindependent& willing parties'

fir: urchase co::it:ent An agreement with an unrelated party&binding on both parties& that specifies allsignificant terms& including the price andtiming of the transactions and includes adisincenti%e for non-performance& that issufficiently large to make performance highl$

ro#a#le '

highl$ ro#a#le Significantly more likely than ro#a#le '

non-current asset As asset that is not a current asset '

ro#a#le +ore likely than not'

reco9era#le a:ount The higher of an asset>s fair 9alue lesscosts to sell and its 9alue in use '

9alue in use The present %alue of cash flows from thecontinuing use of an asset and from itsdisposal'

'''(#anks)ifrs(ru ;;


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.( *lassification of Non-*urrent Assets orDis osal 1rou s as ,eld for Sale;'Non-current assets or disposal groups are classified as =held for sale>& if their

carrying amount will be reco%ered through a sale transaction' A demergerwhere the shares are gi%en to the group>s shareholders does not /ualify as a

sale' 5Howe%er& it may be a discontinued operation from the date of demerger'6

CA+) - carrying amount will be reco%ered through a sale transaction'Eou decide to sell a computer' #ts carrying %alue will be matched by saleproceeds& rather than ser%ice within your bank' $uture cash flows will come fromthe sale of the computer rather than from operations'

2' The asset or disposal group must be a%ailable for immediate sale in its presentcondition and its sale must be highly probable'

CA+) - a%ailable for immediate sale'Eou wish to sell some mining e/uipment ac/uired as collateral that is in adisused mine' To be a%ailable for immediate sale& if will ha%e to be brought to thesurface'

'

4' The held for sale criteria must be met at the balance sheet date& not after'#f the criteria are met after the balance sheet date& but before the appro%al of thefinancial statements for issue& the information should be included in the notes'

CA+) -decision after the balance sheet date'Eour year ends in December' Eou decide so sell a di%ision in the followinganuary' Eour financial statements are appro%ed in +arch' Eou do not changeyour classifications& but disclose the information in the notes 5see #AS ;3workbook6'

As a result of an ac/uisition& a bank ac/uires a non-current asset or disposalgroup e(clusi%ely with a %iew to its subse/uent disposal' 5Normally only part ofan ac/uisition will be sold'6

#t shall classify the non-current asset& or disposal group& as =held for sale> at theac/uisition date& only if the one-year re/uirement is met'

CA+) - ac/uisition with a %iew to its subse/uent disposal'Eou buy a competitor>s global business' Eou will keep the "ussian business butwill sell its operations in Africa' The African operations are ac/uired as part of the

o%erall purchase with a %iew to its subse/uent disposal' They may be =held forsale>'



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Non-current assets that are to #e a#andoned

A non-current asset or disposal group to be abandoned are not classified as=held for sale>' #ts carrying amount will be reco%ered through continuing use'

CA+) -abandoned asset' A client owns a mine' ?hen the minerals are e(hausted& the client will abandonthe mine' All income will come from the minerals' #t is not =held for sale>'

Although an abandoned asset 5or one that will be abandoned in the future6 willnot be =held for sale>& it may form a disposal group and a discontinued operationat the date it ceases to be used'

#f the disposal group to be abandoned1 i represents a separate major line of business or geographical area of

operations&

ii is part of a single co-ordinated plan to dispose of a separate major line ofbusiness or geographical area of operations or

iii is a subsidiary& ac/uired e(clusi%ely with a %iew to resale&

the results and cash flows of the disposal group are represented as =discontinuedoperations> at the date on which it ceases to be used'

CA+) - abandoned group' As part of a sale of a di%ision& one operation will be closed& with no assets soldoutside the group' This operation will not be =held for sale>& but it will be part of=discontinued operations>'

Non-current assets to be abandoned are those to be used to the end of theireconomic life and those that are to be scrapped& or closed& rather than sold'

A non-current asset which has been temporarily taken out of use has not beenabandoned'

2( /easure:ent of Non-*urrent Assets orDis osal 1rou s *lassified as ,eld for Sale

/easure:ent of a non-current asset or dis osal grou

Non-current assets and disposal groups classified as =held for sale> aremeasured at the lo'er of its1 -carrying amount@ and-=fair %alue& less costs to sell>'CA+) - lower of its carrying amount and =fair %alue& less costs to sell>'The carrying amount of your computer is ;33' Eou will sell it& but the netproceeds will only be 93' #ts %alue should be reduced to 93'

#f newly ac/uired assets& or a disposal group& are =held for sale>& they will bemeasured at the lower of cost and =fair %alue& less costs to sell>'

CA+) - lower of cost and =fair %alue& less costs to sell>'Eou buy a group of cash machines' One machine costs you ;:3& but you will

resell it for ;B3'Eou %alue the machine at ;:3

#f the asset or disposal group is ac/uired as part of a business combination& itshall be measured at =fair %alue& less costs to sell>& *ost P fair %alue& ascalculated in a combination& and therefore cost can be used in place of fair %aluein such a case 5see #$"S < workbook6'

CA+) - asset from business combination- =fair %alue& less costs to sell>'Eou buy a group of businesses' Eou will sell one' #t cost ; will be ;23 5;


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#mmediately before the initial classification of the asset or disposal group& as=held for sale>& the carrying amounts are measured in accordance with applicable#$"S>s'

CA+) -re%iew of carrying amounts before the initial classification'Eou are about to sell a di%ision' #n%estment property is included' Eou ha%ere%alued it before' #t should be re%alued again before it is classifying it as =held

for sale> 5see #AS 83 workbook6'

On subse/uent re-measurement of a disposal group& the carrying amounts ofany assets and liabilities that are outside #$"S :& will be re%iewed #efore the =fair%alue& less costs to sell> of the disposal group is remeasured'

Thus& in%entory& accounts recei%able& finance leases and current liabilities will allbe brought up to date before the remeasurement'

CA+) -re%iew of carrying amounts of assets outside #$"S :'#n the disposal group are in%entory and accounts recei%able' )ro%isions forobsolete in%entory and doubtful debts should be re%iewed before the disposalgroup>s =fair %alue& less costs to sell> is remeasured'

Recognition of i: air:ent losses and re9ersals

#mpairment losses are recorded for any initial or subse/uent write-down of theasset& or disposal group& to =fair %alue& less costs to sell>'

Subse/uent increase in =fair %alue& less costs to sell> are recorded as a gain up toa limit of the cumulati%e impairment recorded in accordance with #$"S :&or #AS < '

CA+) -re%ersal of impairment loss'Eour building has a carrying %alue of ;33' #n year ; you ha%e an impairment loss

of ;3& so you reduce the carrying %alue to 93' Eou decide to sell it and the=fair %alue& less costs to sell> is ;3:'

Eou can only increase the %alue to ;33& as this is re%ersing the impact of theimpairment loss' No higher amount can be used'

The impairment loss or any subse/uent gain recorded for a disposal group shallreduce& or increase& the carrying amount of only the non-current assets within thegroup'

CA+) - impairment loss-disposal group'The =fair %alue& less costs to sell> of a disposal group falls by :3' The groupcontains current assets and non-current assets' The loss must be applied to thenon-current assets'

A gain or loss not pre%iously recorded& by the date of the sale of a non-current

asset& or disposal group& shall be recorded at the date of derecognition 5when itis written out of the balance sheet6' This may occur if you ha%e %alued an assetanticipating that it will be sold& and then find that you will be unable to sell it'

CA+) - loss not pre%iously recorded'#n your disposal group& there is an asset worth 3' The buyer refuses to buy thisasset& which is then sold for scrap& for :' The :: reduction in %alue shall berecorded at the date of sale of the disposal group'

"e/uirements relating to derecognition 5when it is written out of the balancesheet6 are set out in1

i #AS ; for property& plant and e/uipment and

ii #AS 6 and any impairment isrecorded'

The main reason that they are neither depreciated nor amortised is that theircarrying amounts are to be realised in sale proceeds& not in the bank>s continuingoperations'

CA+) - not depreciate a non-current asset& classified as =held for sale> - ;Eou ha%e created a =held for sale> disposal group' #t is %alued at =fair %alue& lesscosts to sell>' Eou stop all depreciation of non-current assets from the moment itis classified as =held for sale>'



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CA+) - not depreciate a non-current asset& classified as =held for sale> F 2Depreciation of an asset begins when it is a%ailable for use' That is when theasset is in the location and condition necessary for it to be capable of operating inthe manner intended by management'

Depreciation of an asset ceases at the earlier of when the asset is classified asheld for sale or is when the asset is derecognised Q#AS; R'

6uestionShould management continue to pro%ide depreciation when a factory is held forsale

Background A client owns se%eral factories' +anagement decides to close one of them andclassify it as held for sale because of a fall in demand for one of the productlines' The criteria for this factory to be classified as held for sale are met for thisfactory'

+anagement pro%ides depreciation on the factory using the straight-line method'

SolutionNo& management should not continue to pro%ide depreciation on the factory' #t isclassified as held for sale in accordance with #$"S :'

#nterest and other e(penses attributable to the liabilities of a disposal groupclassified as =held for sale> shall continue to be recorded'

CA+) - #nterest attributable to the liabilities of a disposal group classified as=held for sale> shall continue to be recorded'Eour disposal group includes interest charges from leased e/uipment' This ischarged to the disposal group'

*hanges to a lan of sale Assets classified as =held for sale> cease to be classified if the criteria are nolonger met'

CA+) -no longer =held for sale>'Eou try to sell your insurance di%ision' After months 5in uly6& you take it off themarket'$rom uly& it is no longer classified as =held for sale>'

Non-current assets that cease to be classified as =held for sale> are measured atthe lower of1

i carrying amount before the assets or disposal group was classified as=held for sale>'

This is adjusted for any depreciation& amortisation or re%aluations that wouldha%e been recorded& had the asset or disposal group not been classified as =heldfor sale>

CA+) -no longer =held for sale> %aluation ;'The %alue of your disposal group is ;'333'#f it had not been held for sale& it would ha%e depreciated by :3'

Depreciation is not charged while assets are =held for sale>'#t ceases to be =held for sale>' The additional depreciation of :3 must now becharged'The re%ised %aluation will be 9:3 5;333-:36'

ii reco%erable amount at the date of the subse/uent decision not to sell'

CA+) -no longer =held for sale> %aluation 2'The %aluation of the disposal group is 9:3 5see part ; abo%e6'Ha%ing decided not to sell the di%ision& its assets will be merged with anotherdi%ision though some will be scrapped'

The assets that will be transferred will total B33' Those that will be scrapped willearn 23'

The reco%erable amount will be B23 5B337236'

As this is lower than the %aluation of the disposal group& it will be used as thenew measurement' The loss of ;


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CA+) - impairment loss& arising on a cash-generating unit' A cash generating unit suffers an impairment loss of 2'333& of which ;:3 isallocated to a non-current asset'

The non-current asset>s carrying %alue is 33&which is reduced to 8:3 5 33-;:36accounted for as additional depreciation to adjust for the impairment lossallocation'

An adjustment to the carrying amount of a non-current asset& that ceases to beclassified as =held for sale>& is recorded as an e(pense against income fromcontinuing operations in the period in which the criteria are no longer met'

CA+) -no longer =held for sale> adjustments '

#f it ceases to be =held for sale>& the ;2: will be charged to continuing operations'

#f the asset had been re%alued before classification as =held for sale>& theadjustment shall be treated as a re%aluation increase or decrease'

CA+) -no longer =held for sale> adjustments 8'Eour asset was re%alued from ;'833 to ;' 33& when it became =held for sale>' There%aluation of 233 is credited to the re%aluation reser%e in e/uity' 5See #AS ;and #AS


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CA+) -conditions imposed on the transfer'Eou attempt to sell a foreign subsidiary' The foreign go%ernment blocks the sale&and refuses to recognise the new owners'

Eou know that it will take more than a year to resol%e these bureaucratic issues&but no firm purchase commitment will be made until they are resol%ed'

$or the one-year limit to be e(tended& there must be an e(pectation that a f irmpurchase commitment is highly probable within one year'

2 The firm purchase commitment includes conditions 5buyer or others6 thatwill e(tend the period re/uired to complete the sale and1

i timely actions necessary to respond to the conditions ha%e been takenand

ii a fa%ourable resolution of the delaying factors is e(pected'

CA+) -firm purchase commitment conditionsEou sell a group of mines& obtained as collateral from a client who defaulted on aloan' The buyer insists on geological and en%ironmental sur%eys that will takemore than a year to complete' The sale will be delayed by this action'

< The non-current asset or disposal group that is =held for sale> remainsunsold at the end the initial one-year period and

i during this period& the bank took action to respond to the change in

circumstances&

ii the non-current asset or disposal group is being acti%ely marketed at areasonable price'

CA+) -changes in circumstancesEou ha%e been trying to sell a di%ision to a buyer' The buyer has been delayingthe sale& as the buyer is ha%ing financial difficulties 5unknown to you6'

The buyer goes into li/uidation after ;3 months of negotiation' Eou acti%elymarket the sale of the di%ision to new clients at a reasonable price& but areunable to secure the purchase within one year'

%@change Differences#AS 2; deals with the impact of foreign e(change differences and translationdifferences relating to #$"S : transactions 5see #AS 2; workbook6'

5( Discontinued o erations

+any groups change their composition by ac/uisitions& disposals or both'

Discontinued operations highlight the material parts of groups that are to be 5orha%e been6 sold& e(changed& or demerged' Abandoned non-current assets anddisposal groups may also be reported as discontinued operations& if they arematerial to the group>s results'

!sers wish to distinguish between the parts of the group that will continueoperationally and those parts that will be& or ha%e been& eliminated from thegroup in order to forecast the profits and cash flows for future periods'

+aterial changes in the composition of the group may decrease 5or increase6 therisks of the group>s business'

)ro%iding information about =held for sale> assets and discontinued operationspro%ides rele%ant information on which users can base decisions'

A discontinued operation is a component that either has been disposed of& or isclassified as =held for sale> and

i represents a separate major line of business or geographical area ofoperations@

ii is part of a single co-ordinated plan to dispose of a separate major line ofbusiness or geographical area of operations@ or

iii is a subsidiary& ac/uired e(clusi%ely with a %iew to resale'

Therefore& a discontinued operation may still be trading within the group on thedate of the financial statements& but its disposal is imminent'

Discontinued operations may also include abandoned assets 5see abo%e6 andrepresents a separate major line of business or geographical area of operations&



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e%en though they will not ha%e been classed as =held for sale> 5as e(plained inthe section on abandonment abo%e6'

CA+) SF discontinued operations

Eou decide to sell your branch network' #t is classified as =held for sale> followingthe necessary steps to market it' As a separate major line of business& it will be

classified and reported as a discontinued operation& separately from continuingoperations'

Eou buy a "ussian banking group which also has operations in the !kraine' Eoudecide at the time of purchase of the group that the !kraine operation will besold& and commence marketing it' As a subsidiary ac/uired e(clusi%ely with a%iew to resale& it will be classified and reported as a discontinued operation&separately from continuing operations'

4( Presentation and Disclosure A bank shall present and disclose information that enables users to e%aluate thefinancial effects of discontinued operations and disposals of non-current assets5or disposal groups6'

Presenting discontinued o erations

Disclosure

A bank shall disclose1 ; a single amount on the face of the income statement& comprising the

total of1 i the post-ta( profit of discontinued operations and

ii the post-ta( gain or loss recorded on the measurement to =fair %alue&less costs to sell>& or on the disposal of the assets or disposal group sconstituting the discontinued operation'

2 an analysis of the single amount in ;5abo%e6 into1

i the re%enue& e(penses and pre-ta( the income statement of discontinuedoperations@

ii the related income ta( e(pense 5see #AS ;2 workbook6@

iii the gain or loss recorded on the measurement to =fair %alue& less costs tosell> or on the disposal of the assets& or disposal group s constituting thediscontinued operation@ and

i% the related income ta( e(pense 5#AS ;26'

The analysis may be presented in the notes& or on the face of the incomestatement'

#f it is presented on the face of the income statement& it shall be presented in asection identified as =discontinued operations>& separately f rom continuingoperations'

The analysis is not re/uired for newly-ac/uired subsidiaries that are =held forsale> on ac/uisition'

< the net cash flows attributable to the operating& in%esting and financingacti%ities of discontinued operations'

These disclosures may be presented either in the notes& or on the face of thefinancial statements' These disclosures are not re/uired for newly-ac/uiredsubsidiaries that are =held for sale> on ac/uisition'

Disclosures for the period presented co%er all operations that ha%e beendiscontinued' This may mean representation prior disclosures'

#f there has been e(tra income& or e(pense& in this period& relating todiscontinued operations sold in a pre%ious period& the details will be listed' i the resolution of uncertainties that arise from the terms of the disposaltransaction& such as the resolution of purchase price adjustments and

indemnification issues with the purchaser'ii the resolution of uncertainties that arise from the operations of thecomponent before its disposal& such as en%ironmental and product warrantyobligations retained by the seller' iii the settlement of employee benefit plans obligations& if the settlement isdirectly related to the disposal transaction'

'''(#anks)ifrs(ru ;B


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#f a bank ceases to classify a component as =held for sale>& the results ofoperations of the component pre%iously presented in discontinued operationsshall be reclassified and included in income from continuing operations& for allperiods presented' The amounts for prior periods shall be described as ha%ingbeen re-presented'

1ains or losses relating to continuing o erations

.ains or losses remeasurement of a Jheld for saleL non-current asset or disposalgroup is included as income from continuing operations& pro%ided that it is not adiscontinued operation'

Presentation of a non-current asset or dis osal grouclassified as held for sale

Non-current assets and disposal groups classified as =held for sale> are shownseparately from other assets in the balance sheet'

The liabilities are classified as =held for sale>& are presented separately from other

liabilities& in the balance sheet' They are not offset 5assets minus liabilities6 andpresented as a single amount'

The major classes of assets and liabilities classified as =held for sale> areseparately disclosed either on the face of the balance sheet& or in the notes'

*umulati%e income or e(pense recorded directly in e/uity& relating to a non-current asset or disposal group classified as =held for sale> re/uires separatedisclosure'

$or a newly-ac/uired subsidiary that is =held for sale> on ac/uisition& disclosure ofthe major classes of assets and liabilities is not re/uired'

JHeld for sale> assets and liabilities& that ha%e been recorded for the first time inthe current period& will not be reclassified when presenting prior-periodinformation' Therefore the comparati%e results will not show these JHeld for sale>assets and liabilities in pre%ious periods'

Additional disclosures

#n the period in which a non-current asset or disposal group has been eitherclassified as =held for sale> or sold& disclose in the notes1

i a description of the non-current asset or disposal group@

ii a description of the circumstances of the sale and the manner andtiming of that disposal@

iii the gain or loss and where& on the face of the income statement& to find

the figure that includes that gain or loss@ i% if applicable& the segment in which the non-current asset or disposal

group is presented in accordance with #$"S B Operating Segments'

#n the period of the decision to change the plan to sell the non-current asset ordisposal group disclose1

- a description of the circumstances leading to the decision and- the effect of the decision on the results of operations for the period and

any prior periods presented'



20/24

Discontinuing o eration Illustrated e@a: le>fro: Illustrati9e *or orate Financial State:ents ) ) P'*?

On


21/24

Note C Non-current assets held for sale and discontinued o erations>fro: Illustrati9e *or orate Financial State:ents ) 4 P'*?

The assets and liabilities related to Omikron 5part of the manufacturing andwholesale segment6 ha%e been presented as held for sale following the appro%al of

the .roup>s management and shareholders on 2< September 233 to sell Omikronin ura%ia'

The completion date for the transaction is e(pected by +ay 2334') 4 ) 5

Operating cash flows


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3( /ulti le *hoice 6uestions

+( IFRS 5 co9ersE5i6 The classification& measurement and presentation of assets =held for

sale>'5ii6 The classification and presentation of discontinued operations'5iii6 The impairment of long-li%ed assets to be held and used'

;' i2' ii< iii8 i-ii

)( Assets that :eet the criteria to #e classified as held for sale are:easured

;' *arrying amount'2' =$air %alue& less costs to sell>'


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( 7hen a #ank ac=uires a non-current asset or dis osal grou e@clusi9el$'ith a 9ie' to its su#se=uent dis osal it shall classif$ the non-currentasset or dis osal grou as held for sale at the ac=uisition date onl$ ifE

;' The one year re/uirement is met'2' A buyer has been identified's =fair %alue& less costs to sell> is remeasured'2' After the group>s =fair %alue& less costs to sell> is remeasured'


24/24

This publication has been produced with the assistance of the uropean !nion' Thecontents of this publication are the sole responsibility of UAO)ricewaterhouse*oopersL& $, and uropean Sa%ings ,ank .roup and can in noway be taken to reflect the %iews of the uropean !nion'

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Documents

IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations_upd