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Non-current assets held for sale:

When the non-current asset within your company is about to be sold to the 3rd party maybe because its falling in value then if some criteria are fulfilled then you can reclassify this non-current asset into current asset as “NCA HFS and discontinued operations” under IFRS5.

Classification:

The idea behind the criteria is that you should prove that this sale is probable:

  • Selling purposes by management
  • Available for sale under current condition
  • Locate a buyer actively
  • Expected to complete within 12 months from the year end

If the above criteria are proved then company can reclassify the non-current asset into non-current asset held for sale under current asset.

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Initial measurement:

  • Write down to net realizable value of the asset if it’s a non-current asset held for sale.

    Same idea behind inventory (lower of cost and NRV)-impaired!

    Trick: pick up the lower figure

    Double entry: (NRV<CV)

    • DR non-current asset held for sale (current asset) (statement of financial position)
    • DR I/S(balancing figure)                      (statement of comprehensive income)
    • CR PPE                                            (statement of financial position)

    Double entry: (NRV>CV)

    • DR non-current asset held for sale (current asset) (statement of financial position)
    • CR PPE                                            (statement of financial position)

     

 
Subsequent measurement:

  1. no depreciation or amortization (because we are not consuming the asset any more-not for continued use but for sale.)
  2. further impairment losses
  3. DR I/S

    CR non-current asset held for sale

 

Discontinued operations

A discontinued operation is an operation if it’s closed or sold during the year or held for sale at the year end.

A discontinued operation should:

  1. Dispose of or plan to dispose of a separate major line of business or geographical area of operations;
  2. (Major line of business: eg, financial service industry; supermarket. geographical area: Canada division)

  3. A subsidiary acquired exclusively with a view to resale.
  4. Note: it should be subject to impairment as well same as above. But the key to discontinued operations is about “DISCLOSURE”. (to help users predict future performance based on continuous operations.)

    Disclosure:

    Net cash flow detailing operating, investing and financing activities.

    Single line in the statement of comprehensive income showing post tax profit or loss on discontinued operation.

     

    Analysis of the profit or loss above in the note detailing how to arrive this figure showing detailed:

    Revenue $1,000
    expense $50
    Pre-tax profit $950
    Income tax

      Current tax

      Deferred tax

     

    ($15)

    ($25)

     

    Gains/losses on measurement to NRV