Held for distribution to owners classification
The classification, presentation and measurement requirements of IFRSĀ 5 also apply to a non-current asset (or disposal group) that is classified as held for distribution to owners. [IFRSĀ 5.5A andĀ IFRIC 17]Ā The entity must be committed to the distribution, the assets must be available for immediate distribution and the distribution must be highly probable. [IFRS 5.12A]
Disposal group concept
A ‘disposal group’ is a group of assets, possibly with some associated liabilities, which an entity intends to dispose of in a single transaction. The measurement basis required for non-current assets classified as held for sale is applied to the group as a whole, and any resulting impairment loss reduces the carrying amount of the non-current assets in the disposal group in the order of allocation required by IAS 36. [IFRSĀ 5.4]
Measurement
The following principles apply:
- At the time of classification as held for sale.Ā Immediately before the initial classification of the asset as held for sale, the carrying amount of the asset will be measured in accordance with applicable IFRSs. Resulting adjustments are also recognised in accordance with applicable IFRSs. [IFRSĀ 5.18]
- After classification as held for sale.Ā Non-current assets or disposal groups that are classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell (fair value less costs to distribute in the case of assets classified as held for distribution to owners). [IFRSĀ 5.15-15A]
- Impairment.Impairment must be considered both at the time of classification as held for sale and subsequently:
- At the time of classification as held for sale.Ā Immediately prior to classifying an asset or disposal group as held for sale, impairment is measured and recognised in accordance with the applicable IFRSs (generallyĀ IASĀ 16Ā Property, Plant and Equipment,Ā IASĀ 36Ā Impairment of Assets,Ā IASĀ 38Ā Intangible Assets, andĀ IASĀ 39Ā Financial Instruments: Recognition and Measurement/IFRSĀ 9Ā Financial Instruments). Any impairment loss is recognised in profit or loss unless the asset had been measured at revalued amount under IAS 16 or IAS 38, in which case the impairment is treated as a revaluation decrease.
- After classification as held for sale.Ā Calculate any impairment loss based on the difference between the adjusted carrying amounts of the asset/disposal group and fair value less costs to sell. Any impairment loss that arises by using the measurement principles in IFRSĀ 5 must be recognised in profit or loss [IFRSĀ 5.20], even for assets previously carried at revalued amounts. This is supported by IFRSĀ 5 BC.47 and BC.48, which indicate the inconsistency with IAS 36.
- Assets carried at fair value prior to initial classification.Ā For such assets, the requirement to deduct costs to sell from fair value may result in an immediate charge to profit or loss.
- Subsequent increases in fair value.Ā A gain for any subsequent increase in fair value less costs to sell of an asset can be recognised in the profit or loss to the extent that it is not in excess of the cumulative impairment loss that has been recognised in accordance with IFRSĀ 5 or previously in accordance with IAS 36. [IFRSĀ 5.21-22]
- No depreciation.Ā Non-current assets or disposal groups that are classified as held for sale are not depreciated. [IFRSĀ 5.25]
The measurement provisions of IFRSĀ 5 do not apply to deferred tax assets, assets arising from employee benefits, financial assets within the scope ofĀ IFRSĀ 9Ā Financial Instruments, non-current assets measured at fair value in accordance withĀ IASĀ 41Ā Agriculture, and contractual rights under insurance contracts.Ā [IFRSĀ 5.5]
