An Executive Guide to IFRS: Content, Costs and Benefits to Business

Assets held for sale

The IASB withdrew their previous standard on this subject (IAS 35) in 2004 and replaced it with a standard (IFRS 5 Non-current Assets held for Sale and Discontinued Operations) that is intended to be closely aligned with those parts of the US SFAS 144 that address sales of parts of a business. The converged standard mandates that when a non-current asset or group of assets and liabilities (‘a disposal group’) is to be sold, the asset or disposal group will be classified separately in the balance sheet, valued at the lower of carrying value and fair value less costs to sell. The standard also requires that income from the asset or disposal group is shown separately in the income statement. The standard has the usual exceptions to its scope: it does not apply to financial instruments, insurance assets, deferred tax assets, agricultural assets, pension assets and investment properties accounted for at fair value.

A key issue is the point at which an asset shifts from being in current use to being accounted for as held for sale. The standard (IFRS5.6–8) says:

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

For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) ...