History of IFRS5
|September 2002||Project added to the IASB agenda||project history|
|July 24, 2003||ED 4 draftDisposal of fixed assets and presentation of discontinued operationspublished||Comment Deadline October 24, 2003|
|March 31, 2004||IFRS5Non-current assets held for sale and discontinued operationsproblematic||Effective for fiscal years beginning on or after January 1, 2005|
|May 22, 2008||changed byImprovements to IFRS 2007(Sale of majority stake in subsidiary)||Effective for fiscal years beginning on or after July 1, 2009|
|November 27, 2008||consequential changesCINIIF 17 Property Distributions to Owners(assets held for distribution to owners)||Effective for fiscal years beginning on or after July 1, 2009|
|April 16, 2009||changed byImprovements to IFRS 2009(Disclosure requirements in other standards)||Effective for fiscal years beginning on or after January 1, 2010|
|25. September 2014||changed byImprovements to IFRS 2014(changes in removal methods)||Valid for fiscal years beginning on or after January 1, 2016|
changes under consideration
- Convergence – Assets Held for Sale and Discontinued Operations
Summary of IFRS5
IFRS5 achieves significant convergence with the requirements of US SFAS 144Accounting for impairment or disposal of long-lived assetsin relation to the moment of the classification of the operations as discontinued and the presentation of said operations. With respect to long-lived assets that will not be sold, the standards for recognizing and measuring impairment in SFAS 144 differ significantly from those inNIC 36 asset impairment. However, these differences were not addressed in the short-term convergence project by the IASB and FASB.
Significant provisions of IFRS 5 relating to assets held for sale
Classification as held for sale
In general, the following conditions must be met for an asset (or a "disposal group of assets") to be classified as held for sale: [IFRS 5.6-8]
- Management has committed to a sales plan.
- The asset is available for immediate sale
- an active program to find a buyer is started
- sale within 12 months of classification as held for sale is highly probable (subject to limited exceptions)
- The asset is actively marketed for sale at a sale price that is reasonable in relation to its fair value
- The actions required to complete the plan indicate that the plan is unlikely to be significantly modified or withdrawn
The assets must be disposed of by sale. Therefore, operations that are expected to be liquidated or ceased would not meet the definition (but may be classified as discontinued upon cessation). [IFRS 5.13]
An entity that has committed to a sale that involves the loss of control of a subsidiary that qualifies for classification as held for sale under IFRS 5 classifies all assets and liabilities of that subsidiary as held for sale, even if the entity is a subsidiary that is not held for sale. Majority stake in its former subsidiary after the sale. [IFRS 5.8A]
Withheld for distribution to owner classification
The classification, presentation and measurement requirements of IFRS 5 also apply to a non-current asset (or group of disposal assets) classified as held for distribution to owners. [IFRS 5.5A andCINIIF 17] The entity must have committed to the distribution, the assets must be available for immediate distribution and the distribution must be highly probable. [IFRS 5.12A]
alienation group concept
A “disposal group” is a group of assets, possibly with some associated liabilities, that an entity intends to dispose of in a single transaction. The required measurement basis for non-current assets classified as held for sale is applied to the group as a whole and any resulting impairment loss reduces the carrying amount of non-current assets in the disposal group in the order of allocation required by IAS 36 [IFRS 5.4]
The following principles apply:
- At the time of classification as held for sale.Immediately before the asset is classified as held for sale for the first time, the carrying amount of the asset is determined in accordance with the applicable IFRS. Any resulting adjustment is also recognized in accordance with applicable IFRS. [IFRS 5.18]
- After classification as held for sale.Non-current assets or disposal groups classified as held for sale are valued at the lower of book value and fair value less costs to sell (for assets classified as held for distribution to owners, fair value minus distribution costs). [IFRS 5.15-15A]
- Disability.Impairment must be considered both at the time of classification as held for sale and subsequently:
- At the time of classification as held for sale.Immediately before a disposal asset or group of assets is classified as held for sale, an impairment loss is measured and recognized in accordance with applicable IFRS (generallyNIC 16 Sachanlagen,NIC 36 asset impairment,NIC 38 intangible assets, yNIC 39 Financial instruments: recognition and measurement/NIIF9 financial instruments). Any impairment loss is recognized in profit or loss unless the asset has been measured at the revalued amount in accordance with IAS 16 or IAS 38; in this case the impairment is treated as a revaluation impairment.
- After classification as held for sale.Calculate any impairment loss based on the difference between the adjusted book values of the asset/group of assets for disposal and the fair value less costs to sell. Any impairment loss resulting from the application of the valuation principles of IFRS 5 will be recognized in profit or loss [IFRS 5.20], including assets previously measured at revalued amounts. This is supported by IFRS5 BC.47 and BC.48, which indicate the inconsistency with IAS 36.
- Assets measured at fair value before initial classification.For such assets, the requirement to deduct the cost of disposal from fair value may result in an immediate charge to profit or loss.
- Subsequent increases in fair value.A gain from a subsequent increase in fair value less disposal costs of an asset may be recognized in profit or loss provided it does not exceed the cumulative impairment loss recognized in accordance with IFRS 5 or previously recognized in accordance with IAS 36. [IFRS 5. 21-22]
- No depreciation.Non-current assets or alienable groups of items classified as held for sale are not amortized. [IFRS 5.25]
The IFRS5 valuation rules do not apply to deferred tax assets, employee benefit assets, financial assets within the scope ofNIIF9 financial instruments, non-current assets measured at fair value in accordance withNIC 41 Agriculture, and contractual rights derived from insurance contracts. [IFRS 5.5]
Assets classified as held for sale and assets and liabilities contained in a disposal group classified as held for sale must be presented separately on the balance sheet. [IFRS 5.38]
IFRS 5 requires the following disclosures about assets (or disposal groups) held for sale: [IFRS 5.41]
- Description of the non-current asset or alienable group of items
- Description of the facts and circumstances of the sale (sale) and the probable timing
- any impairment losses and reversals and where they are recognized in the statement of comprehensive income
- If applicable, the reportable segment in which the non-current asset (or disposal group) is presented in accordance withIFRS 8 business segments
The disclosures in other IFRSs do not apply to assets held for sale (or discontinued operations, see below) unless those other IFRSs require specific disclosures in relation to such assets or in relation to certain measurement disclosures when the assets and liabilities that are not within the scope of IFRS fall under the measurement requirements of IFRS5. [IFRS 5.5B]
Significant provisions of IFRS 5 relating to discontinued operations
Classification as expiring
A discontinued operation is a component of an entity that has been disposed of or classified as held for sale and: [IFRS 5.32]
- represents a separate major line of business or geographic area of operation
- It is part of a single coordinated plan to divest from a separate main business line or geographic area of business, or
- is a subsidiary that was acquired solely with the intent to resell it and the sale implies a loss of control.
IFRS 5 prohibits retrospective classification as a discontinued operation if the criteria for discontinuation are met after the end of the reporting period. [IFRS 5.12]
Information to be disclosed in the statement of comprehensive income
The sum of the after-tax gain or loss of the discontinued operation and the after-tax gain or loss recognized on fair value measurement less costs to sell or fair value adjustments on disposing of the assets (or group of assets) is presented. of disposal) as a single amount in the statement of comprehensive income. If the company reports profit or loss in separate financial statements, a section relating to discontinued operations is presented in those separate financial statements. [IFRS 5.33-33A].
Detailed disclosure of pre-tax income, expenses, gains or losses and related income taxes is required, either in the notes or in the statement of comprehensive income in a separate section of continuing operations. [IFRS 5.33] Such detailed information should cover both the current period and all prior periods presented in the financial statements. [IFRS 5.34]
cash flow information
The net cash flows attributable to the operating, investing and financing activities of a discontinued operation are presented separately in the statement of cash flows or disclosed in the notes. [IFRS 5.33]
The following additional information is required:
- Adjustments made in the current period to amounts reported as discontinued operations in prior periods should be disclosed separately [IFRS 5.35]
- When an entity no longer classifies a component as held for sale, the previously reported profit or loss of that component in discontinued operations should be reclassified and included in earnings from continuing operations for all periods presented [IFRS 5.36].
Special edition of the IAS Plus bulletin on IFRS5
Click to download aworld special editionourIAS Plus Newsletter(PDF 56k) dedicated to IFRS5.