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Discontinued operation as per IFRS 5 – meaning and explanation

A discontinued operation is the component of an entity that either has been disposed off, or is classified as held for sale and:

  • represent a separate major line of business or geographical area of operation;
  • is part of single coordinated plan to dispose of a separate major line of business or geographical area of operation or;
  • is a subsidiary acquired exclusively with view to resale

Discontinued operation are presented separately at the end of profit or loss by including the profit after tax generated by discontinued operations. This figure should include the post tax gain or loss on disposal of the assets of the operation or the gain or loss on re measurement following transfer to ‘held for sale’

A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cash generating unit or a group of cash generating units while being held for use.
An entity shall not classify as held for sale a non current asset (or disposal group) that is to be abandoned. This is because its carrying amount will be recovered  principally through continuing use.

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