IFRS 5 (non current asset held for sale and discontinued operation) set out the principles governing the measurement and presentation on non current asset that are expected to be realized through sale rather than through continuing use. The standard also deals with reporting the results of operations that qualify as discontinued.
A non current asset is classified as ‘held for sale’ if its carrying amount will be received principally through a sale transaction rather than through continued use. For this to be the case;
- The asset must be available for immediate sale in its present condition, and
- The sale must be highly probable. IFRS 5 list the conditions which must be met if a sale is to be considered highly probable;
- Management should be committed to a plan to sell the asset
- An active program should be initiated to locate the buyer and complete the plan.
- The asset should be actively marketed at a sale price that is reasonable in relation to its current value .
- A completed sale should be expected within one year from the date of classification (may be extended if any delay is caused by circumstances beyond entity’s control); and
- It should be unlikely that there will be any significant changes to the plan or that the plan will be withdrawn.
If these criteria are not satisfied at the end of reporting period, the asset should not be classified as held for sale. If the criteria are satisfied after the reporting period but before the financial statements are authorized for issue, the fact that the asset is now classified as held for sale should be disclosed in the notes of financial statements.