Ind AS 105: Non-current Asset Held For Sale & Discontinued Operations

1. Objective

Ind AS 105, prescribe accounting for Non-current Asset held for sale and presentation & disclosure of discontinued operations.

2. Definition

(i) Current assets

An assets to be current if 

1. It is expected to be realized, consumed, and used within a normal operating cycle.
2. It is expected to be realized, consumed, and used within 12 months from the date of reporting.
3. It is held for trading
4. It is the cash and cash equivalent.

(ii) Non-current assets

Assets which are not current assets.

(iii) Assets held for sale

Non-current assets that will be recovered through selling the assets rather than use.

(iv) Disposal group

A group of assets & possibly some liability, an entity intends to dispose off in a single transaction.

(v) Discontinued Operations

A component* of an entity that either has been disposed off  or classified as held for sale.

*Component: Branch, subsidiary, segment through a plan is being disposed off it represent a major area of operation or geographical area of operation.

This component is such that it can be identified independently (means it is distinguishable) for operation and financial decision making.[Assets, Liabilities, Experience, Income can be directly attributable to it.]

(vi) Following event cannot be considered is discontinued operation as per Ind AS 105

1. Restructuring
2. Gradual phasing out of a product line or class of services.
3. Discontinued several products within an ongoing line of business.
4. Shifting of some production or marketing activity from one location to another.
5. Closing of a facility to achieve productivity improvement or cost savings.
6. Sale of subsidiary engaged in similar business that of parent.

3. Recognition if Non-current assets held for sale as per Ind AS 105

1. It must be available for immediate sale in its parent condition.
2. It may be subject to some customary terms & conditions.
3. The sale is highly probable*

*Highly probable means if

• Management commitment

• Active effort to locate buyer

• Assets has active market

• Expected that the sale will be completed in 12 months.

4. Abandoned Non-current assets as per Ind AS 105

1. Entity should not classify as held for sale a non-current assets that is to be abandoned
2. What about the disposal group being abandoned (ask whether it is discontinued operation? Yes, then disclosure required)

Also read: Ind AS 40:Investment property

5. Measurement of Non-current assets held for sale as per Ind AS 105

Non-current assets held for sale measured in carrying amount or Fair value less cost of disposal whichever is less.

Note: 

1. Cost of disposal to be discounted at present value (P.V) of it is beyond 1 year.
2. No depreciation charged on Non-current assets held for sale.

6. Change to a plan of sale

Value of Non-current assets is lower of;

1. carrying amount before it was classified as Non-current assets held for sale (adjusted by depreciation) or
2. Recoverable amount on the date of change 

7. Presentation & disclosure as per Ind AS 105

(i) Discontinued Operations

Profit and loss A/c

1. What is a pre tax profit from discontinued operation.
2. What is a pre tax expenses from discontinued operation
3. What are the post tax expenses?

Cash Flow statement:

1. What is a cashflow attributing from Investing, Financial & Operating activities of business.

(ii) Assets held for sale

1. Liabilities & assets disclosed separately.
2. Remember offsetting is not permitted.