IFRS 5 Non-current Assets Held
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LACPA – Roger Nasr July 6, 2006 PowerPoint PPT Presentation


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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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LACPA – Roger Nasr July 6, 2006

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Lacpa roger nasr july 6 2006

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


Lacpa roger nasr july 6 2006

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


Selected cases

Selected cases


Selected cases1

Selected cases


Lacpa roger nasr july 6 2006

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 XX

Cost of sales(X)(X)

Gross profitXX

Other operating incomeXX

Distribution costs(X)(X)

Administrative expenses(X)(X)

Other operating expenses(X)(X)

Finance costs (X)(X)

Share of profit of associateXX

__________

Profit before tax XX

Income tax expense (X)(X)

__________

Profit for the period from continuing operationsXX

Discontinued Operations

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

__________

Profit for the periodAB

__________

Attributable to :

Equity holders of the parent ac

Minority interest bd

__________

AB

__________


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


Income tax disclosure

Income Tax Disclosure


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 XX

Other intangible assetsXX

Property, plant and equipmentXX

Available for sale investments XX

Finance lease receivablesXX

__________

X X

Current assets__________

Inventories XX

Finance lease receivablesXX

Trade and other receivablesXX

Cash and cash equivalentsXX

__________

XX

Non-current assets classified as held for saleXX

__________

XX

__________

Total assets XX

__________


Balance sheet liabilities

Balance Sheet - Liabilities

Current liabilities20052004

Trade and other payables XX

Retirement benefit obligationXX

Tax liabilitiesXX

Bank overdrafts and loansXX

__________

X X

Non-current liabilities__________

Bank loans XX

Retirement benefit obligationXX

Deferred tax liabilitiesXX

Long-term provisionsXX

__________

X X

Liabilities directly associated with non-current

assets classified as held for saleXX

__________

XX

__________

Total liabilitiesXX

__________

Net assetsXX

__________


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


Presentation and disclosure inventories

Presentation and Disclosure – Inventories


Questions

Questions


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