Non-Current Asset Held for Sale [IFRS 5]

A non-current asset (or disposal group) should be classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.

A number of detailed criteria must be met:

(a) The asset must be available for immediate sale in its present condition.

(b) Its sale must be highly probable

-committed to a plan to sell

-active programme to locate a buyer

-marketed for sale at a price that is reasonable)

(c) The sale should be expected to take place within one year from the date of classification.

Measurement of assets held for sale

A non-current asset (or disposal group) that is held for sale should be measured at the lower of its carrying amount and fair value less costs to sell. Fair value less costs to sell is equivalent to net realisable value. An impairment loss should be recognised where fair value less costs to sell is lower than carrying amount. Note that this is an exception to the normal rule. IAS 36 Impairment of assets requires an entity to recognise an impairment loss only where an asset's recoverable amount is lower than its carrying value. Recoverable amount is defined as the higher of net realisable value and value in use. IAS 36 does not apply to assets held for sale. Non-current assets held for sale should not be depreciated, even if they are still being used by the entity.

Presentation

Non-current assets and disposal groups classified as held for sale should be presented separately under current assets in the statement of financial position.

Definition:

Fair value: the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.*

Costs to sell: the incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income tax expense.

Recoverable amount: the higher of an asset's fair value less costs to sell and its value in use.

Value in use: the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.