TMI BlogNon-current Assets Held for Sale and Discontinued OperationsX X X X Extracts X X X X X X X X Extracts X X X X ..... ements of this Ind AS apply to all recognised non-current assets1 and to all disposal groups of an entity. The measurement requirements of this Ind AS apply to all recognised non-current assets and disposal groups (as set out in paragraph 4), except for those assets listed in paragraph 5 which shall continue to be measured in accordance with the Standard noted. 3 Assets classified as non-current in accordance with Ind AS 1, Presentation of Financial Statements, shall not be reclassified as current assets until they meet the criteria to be classified as held for sale in accordance with this Ind AS. Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as current unless they meet the criteria to be classified as held for sale in accordance with this Ind AS. 4 Sometimes an entity disposes of a group of assets, possibly with some directly associated liabilities, together in a single transaction. Such a disposal group may be a group of cash-generating units, a single cash-generating unit, or part of a cash-generating unit. 2 The group may include any assets and any liabilities of the entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements of Ind AS 1, in particular paragraphs 15 and 125 of that Standard. Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners 6 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. 7 For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. Thus, an asset (or disposal group) cannot be classified as a non-current asset (or disposal group) held for sale, if the entity intends to sell it in a distant future. 8 For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation specified in paragraph 41(a), (b) and (d) in the notes. 12A A non-current asset (or disposal group) is classified as held for distribution to owners when the entity is committed to distribute the asset (or disposal group) to the owners. For this to be the case, the assets must be available for immediate distribution in their present condition and the distribution must be highly probable. For the distribution to be highly probable, actions to complete the distribution must have been initiated and should be expected to be completed within one year from the date of classification. Actions required to complete the distribution should indicate that it is unlikely that significant changes to the distribution will be made or that the distribution will be withdrawn. The probability of shareholders approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable. Non-current assets that are to be abandoned 13 An entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned. This is because its carrying amount will be recovered principally through contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l group classified as held for sale, shall be remeasured in accordance with applicable Ind ASs before the fair value less costs to sell of the disposal group is remeasured. Recognition of impairment losses and reversals 20 An entity shall recognise an impairment loss for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell, to the extent that it has not been recognised in accordance with paragraph 19. 21 An entity shall recognise a gain for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognised either in accordance with this Ind AS or previously in accordance with Ind AS 36, Impairment of Assets. 22 An entity shall recognise a gain for any subsequent increase in fair value less costs to sell of a disposal group: (a) to the extent that it has not been recognised in accordance with paragraph 19; but (b) not in excess of the cumulative impairment loss that has been recognised, either in accordance with this Ind AS or previously in accordance with Ind AS 36, on the non-current assets that are within the scope of the measuremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution to owners) and recognise any reduction or increase in the fair value less costs to sell/costs to distribute of the non-current asset (or disposal group) by following the requirements in paragraphs 20 25. (c) shall not change the date of classification in accordance with paragraphs 8 and 12A. This does not preclude an extension of the period required to complete a sale or a distribution to owners if the conditions in paragraph 9 are met.] 3 [27. The entity shall measure a non-current asset (or disposal group) that ceases to be classified as held for sale or as held for distribution to owners (or ceases to be included in a disposal group classified as held for sale or as held for distribution to owners) at the lower of: (a) its carrying amount before the asset (or disposal group) was classified as held for sale or as held for distribution to owners, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale or as held for distribution to owners, and (b) its recoverable amount at the date of the subsequent decision not to sell or distribute 5 .] 4 [28 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scontinued operations 31 A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use. 32 A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and (a) represents a separate major line of business or geographical area of operations, (b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or (c) is a subsidiary acquired exclusively with a view to resale. 33 An entity shall disclose: (a) a single amount in the statement of profit and loss comprising the total of: (i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation. (b) an analysis of the single amount in (a) into: (i) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtainties that arise from and are directly related to the operations of the component before its disposal, such as environmental and product warranty obligations retained by the seller. (c) the settlement of employee benefit plan obligations, provided that the settlement is directly related to the disposal transaction. 36 If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations in accordance with paragraphs 33 35 shall be reclassified and included in income from continuing operations for all periods presented. The amounts for prior periods shall be described as having been re-presented. 36A An entity that is committed to a sale plan involving loss of control of a subsidiary shall disclose the information required in paragraphs 33 36 when the subsidiary is a disposal group that meets the definition of a discontinued operation in accordance with paragraph 32. Gains or losses relating to continuing operations 37 Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision to change the plan to sell the non-current asset (or disposal group), a description of the facts and circumstances leading to the decision and the effect of the decision on the results of operations for the period and any prior periods presented. 1 For assets classified according to a liquidity presentation, non-current assets are assets that include amounts expected to be recovered more than twelve months after the reporting period. Paragraph 3 applies to the classification of such assets. 2 However, once the cash flows from an asset or group of assets are expected to arise principally from sale rather than continuing use, they become less dependent on cash flows arising from other assets, and a disposal group that was part of a cash-generating unit becomes a separate cash-generating unit. 3 Other than paragraphs 18 and 19, which require the assets in question to be measured in accordance with other applicable Accounting Standards. 4 Costs to distribute are the incremental costs directly attributable to the distribution, excluding finance costs and income tax expense. 5 If the non-current asset is part of a cash-generating unit, its recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a subsidiary acquired exclusively with a view to resale. disposal group A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated in accordance with the requirements of paragraphs 80 87 of Ind AS 36, Impairment of Assets, or if it is an operation within such a cash generating unit. fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See Ind AS 113.) firm purchase commitment An agreement with an unrelated party, binding on both parties and usually legally enforceable, that (a) specifies all significant terms, including the price and timing of the transactions, and (b) includes a disincentive for non-performance that is sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly considered unlikely and, as a result, a non-current asset (or disposal group) previously classified as held for sale is not sold by the end of that period, and: (i) during the initial one-year period the entity took action necessary to respond to the change in circumstances, (ii) the non-current asset (or disposal group) is being actively marketed at a price that is reasonable, given the change in circumstances, and (iii) the criteria in paragraphs 7 and 8 are met. Appendix C References to matters contained in other Indian Accounting Standards This Appendix is an integral part of the Ind AS. Appendix A, Distributions of Non-cash Assets to Owners, contained in Ind AS 10, Events after the Reporting Period. Appendix 1 Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 105 and the corresponding International Financial Reporting Standard (IFRS) 5, Non-current Assets Held for Sale and Discontinued Operations, issued by the International Accounting Standards Board. Comparison with IFRS 5, N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for sale. 2. Inserted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 3. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, 27 The entity shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of: (a) its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale, and (b) its recoverable amount at the date of the subsequent decision not to sell.5 4. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, 28 The entity shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale in profit or loss6 from continuing operations in the period in which the criteria in paragraphs 7 9 are no longer met. Financial statements for the periods since classification as held for sale shall be amended accordingly if the disposal gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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