IFRS 5 Non-current Assets Held
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IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. LACPA – Roger Nasr July 6, 2006. Main Content of IFRS 5. Definition of a discontinued operation. Very much the same as the definition in IAS 35. Timing of classification as a discontinued operation.

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IFRS 5 Non-current Assets Held

for Sale and Discontinued Operations

LACPA – Roger Nasr

July 6, 2006


Main content of ifrs 5
Main Content of IFRS 5

Definition of

a discontinued operation

Very much the same as the definition in IAS 35

Timing of classification as a discontinued operation

When the discontinued operation is disposed of or meets “held for sale” criteria

Non-current assets / disposal groups

held for sale

Write down to fair value less costs to sell

Depreciation not permitted.

Presented separately in the balance sheet

Results and cash flows of

discontinued operations

Presented separately in the income and cash flow statements


Held for sale classification .


Scope
Scope

  • The classification and presentation requirements apply to all recognised non-current assets and to all disposal groups

    Disposal group–

  • A group of assets and associated liabilities to be disposed of, by sale or otherwise, as a group in a single transaction

  • Includes goodwill acquired in a business combination if the group is a CGU to which goodwill was assigned (IAS 36)


Held for sale classification
Held for Sale Classification

  • “Held for sale” criteria

    (para 7,8)

Management is committed to a plan to sell

Available for immediate sale in present condition

Active program to locate a buyer initiated

AND

Sale generally expected within 12 months

The sale is highly probable

Actively marketed at a reasonable price

Requirements to complete indicate plan won’t alter




Presentation andDisclosure .


Discontinued operations
Discontinued Operations

  • Discontinued operation

represents a separate major line of business or geographical area of operations, or

Component ** of an entity that has been disposed of

part of single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or

AND

OR

Classified as held for sale

is a subsidiary acquired exclusively with a view to resale

**Operations & cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from rest of entity


Presentation and disclosure discontinued operations
Presentation and Disclosure – Discontinued Operations

  • A single amount on face of the income statement comprising total of

    • Post-tax profit or loss of the discontinued operation and

    • Post-tax gain or loss recognised on the measurement to fair value less costs to sell or on disposal

  • An analysis of that amount on face or in the notes into

    • Revenue, expenses and pre-tax profit or loss of discontinued operations and the related income tax expense

    • Gain or loss recognised on measurement to fair value less costs to sell or on disposal of the assets or disposal group(s) constituting the discontinued operation and the related income tax expense


Income statement function
Income Statement - Function

Continuing Operations20052004

Revenue X X

Cost of sales (X)(X)

Gross profit X X

Other operating income X X

Distribution costs (X) (X)

Administrative expenses (X) (X)

Other operating expenses (X) (X)

Finance costs (X) (X)

Share of profit of associate X X

_____ _____

Profit before tax X X

Income tax expense (X) (X)

_____ _____

Profit for the period from continuing operations X X

Discontinued Operations

Profit/ (loss) for the period from discontinued operations X (X)

_____ _____

Profit for the period A B

__________

Attributable to :

Equity holders of the parent a c

Minority interest b d

_____ _____

A B

__________


Presentation and disclosure discontinued operations1
Presentation and Disclosure – Discontinued Operations

  • As a result of this disclosure requirement, income statement is divided into two sections

    • Continuing operations

    • Discontinuing operations


Presentation and disclosure discontinued operations2
Presentation and Disclosure – Discontinued Operations

  • Various standards require disclosure of totals for entity as a whole for components of income and expense

    • The disclosures pre-date IFRS 5

  • IFRS 5 splits the income statement and detail presented on the face relates to continuing operations

  • One solution - present analyses of these items between continuing and discontinuing operations in notes, and a total for the entity as a whole



Presentation and disclosure held for sale
Presentation and Disclosure – Held for Sale

  • Non-current assets (or the assets of a disposal group) are shown separately from other assets

  • The liabilities of the disposal group shall be presented separately from other liabilities

  • Assets and liabilities shall not be offset

  • Major classes of assets and liabilities disclosed separately either on balance sheet or notes

    • Exemption for newly acquired subsidiaries

  • Prior periods are not reclassified


Balance sheet assets
Balance Sheet - Assets

Non-current assets20052004

Goodwill X X

Other intangible assets X X

Property, plant and equipment X X

Available for sale investments X X

Finance lease receivables X X

_____ _____

X X

Current assets _____ _____

Inventories X X

Finance lease receivables X X

Trade and other receivables X X

Cash and cash equivalents X X

_____ _____

X X

Non-current assets classified as held for saleX X

_____ _____

X X

_____ _____

Total assets X X

__________


Balance sheet liabilities
Balance Sheet - Liabilities

Current liabilities20052004

Trade and other payables X X

Retirement benefit obligation X X

Tax liabilities X X

Bank overdrafts and loans X X

_____ _____

X X

Non-current liabilities _____ _____

Bank loans X X

Retirement benefit obligation X X

Deferred tax liabilities X X

Long-term provisions X X

_____ _____

X X

Liabilities directly associated with non-current

assets classified as held for saleX X

_____ _____

X X

_____ _____

Total liabilitiesX X

__________

Net assetsX X

__________


Presentation and disclosure held for sale1
Presentation and Disclosure – Held for Sale

  • Ensure IFRS 5 does not adversely affect compliance with disclosure requirements in other standards

    • Eg IAS 1 requires the disclosure of total inventory on face of balance sheet

  • When inventory is reclassified as held for sale and presented with other assets in a disposal group on the face, this requirement cannot be met

  • Suggestion - to meet this requirement and IAS 2.36(b), the following analysis could be provided in the notes




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