Q1: What is IFRS 5?
IFRS 5 is an International Financial Reporting Standard that provides guidance on the accounting for assets held for sale and discontinued operations. It outlines the requirements for recognizing, measuring, presenting, and disclosing information about these assets and operations in an entity's financial statements.
Q2: What is an asset held for sale?
An asset held for sale is a non-current asset that an entity intends to sell in its present condition and that is available for immediate sale. The asset must be actively marketed, and the sale should be expected to be completed within one year from the date of classification as held for sale.
Q3: How should assets held for sale be accounted for under IFRS 5?
Under IFRS 5, an asset held for sale should be measured at the lower of its carrying amount and fair value less costs to sell. Any impairment loss recognized for the asset should be included in profit or loss.
Q4: What is a discontinued operation?
A discontinued operation is a component of an entity that has been disposed of or is classified as held for sale, and that represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of such a line of business or area of operations.
Q5: How should discontinued operations be accounted for under IFRS 5?
Under IFRS 5, a discontinued operation should be presented as a single line item in the income statement, net of tax. The income statement should show the results of operations of the discontinued operation for the current period and the prior periods presented separately from the results of continuing operations. In addition, the entity should disclose information about the assets, liabilities, and cash flows of the discontinued operation and the results of its operations.
Q6: When should an asset be classified as held for sale or a component of an entity be classified as discontinued operation?
An entity should classify an asset as held for sale and a component of an entity as discontinued operation when it meets certain criteria, including:
- The asset or component is available for immediate sale in its present condition.
- The sale is highly probable, meaning that it is expected to be completed within one year from the date of classification.
- The asset or component is actively marketed.
- The sale is being actively pursued at a price that is reasonable in relation to its fair value.
- The asset or component is unlikely to be withdrawn from sale or the plan to dispose of it is unlikely to be abandoned.
Q7: Are there any exemptions or exceptions to the requirements of IFRS 5?
IFRS 5 provides limited exemptions for the measurement of assets that are measured at fair value in accordance with other IFRSs, and for the measurement of assets held for sale that are part of a disposal group that is classified as held for sale. However, these exemptions are only available in specific circumstances, and entities should carefully consider whether they apply.