Assets held for disposal
This subject is dealt with at more length in Chapter 6, but it is appropriate to mention it here as well. IFRS 5 Non-current assets Held for Sale and Discontinued Operations provides broadly that where a company has decided to dispose of an asset, it should thereafter be classified in the balance sheet as an asset held for disposal. Its results should be similarly disclosed separately in the profit and loss account (income statement). This frequently affects investments in other companies. On the one hand, large groups ‘churn’ their activities fairly regularly, getting rid of operations that are no longer sufficiently profitable, or no longer fit strategy. Once the decision has been taken to sell a subsidiary, all its assets and liabilities are classified separately and should be measured at fair value less selling costs.
The other fairly frequently occurring case is where a company takes over another group, but decides to sell one or more subsidiaries immediately, either in response to regulatory specifications or because they do not fit the enlarged group. In such a case the operations that are being sold are removed from the purchase price allocation as a disposal group and are accounted for as such until sale.