Objectives of Ind As 105

A) Non-Current assets held for sale

i) are presented separately from other assets in the Balance Sheet

ii) as their classification will change and

iii) the value will be principally recovered through sale transaction rather than through  continuous use in operations of the entity.

B) Results of Discontinuing Operations should be

i) separately presented in the Statement of Profit and loss as it affects the ability of the entity to generate future cash flows.

Some Definitions:-

  • Disposal GroupDisposal group is a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. A disposal group may be a group of cash-generating units, a single cash-generating unit, or part of a cash-generating unit
  • Fair Value : IND AS 113 : Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (Ind AS 113)
  • Discontinued operations : A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and:
  • represents a separate major line of business or geographical area of operations; or
  • is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
  • is a subsidiary acquired exclusively with a view to resale.

Ind As 105 Non-Current assets held for sale and Discontinuing Operations

APPLICABILITY:-

1. Applicability to all NCA & disposal groups with followings exceptions:

a). Deferred tax assets (Ind As-12)

b). Employee benefit assets (Ind As-19)

c). Financial Instruments (Ind As- 109)

d). NCA measured at FVLCTS (Ind As-41)

e). Insurance Contracts (Ind As-104)

Classification:-

Any entity is required to classify a non current assets or disposal groups as held for sale :-

1. If carrying amount will be recovered principally through a sale transaction rather than through continuing use.

2. Other Conditions :

i) Available for immediate sale in present condition &

ii) Sale must be highly probable(>90%)

a) Management committed to a plan to sell with necessary approval

b) Active program to find a buyer initiated

c) Assets actively marketed for sale at reasonable price to its current fair value

d) Significant changes to plan are unlikely

e) The sale transaction is expected to be completed with in one year

Exception to the period of one year

  • the delay must have been caused by the events or circumstances which are beyond the control of the entity;
  • there must be sufficient evidences that the entity is still committed to it selling plan.

MEASUREMENT:-

  • . An entity should measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell.
  • Depreciation and amortization shall be immediately stopped from the moment the asset has been classified as held for sale.
  • Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognised.
  • When the sale is expected to occur beyond one year, the entity should measure the costs to sell at their present value. Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost.
  • Non-current asset (or disposal group) classified as held for distribution are also measured on same line as non-current asset (or disposal group) classified as held for sale.

RECOGNITION OF IMPAIRMENT LOSSES AND REVERSALS:-

  • An entity should recognise an impairment loss for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell, to the extent that it has not been recognised in accordance with above.
  • An entity should recognise a gain for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognised either in accordance with this Ind AS or previously in accordance with Ind AS 36, Impairment of Assets.

CHANGES TO PLAN OF SALE

1.  If an entity has classified an asset (or disposal group) as held for sale, but the held for sale criteria no longer met, the entity should cease to classify the asset (or disposal group) as held for sale.

2. The entity shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of: (a) its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale; and (b) its recoverable amount at the date of the subsequent decision not to sell.

PRESENTATION OF A NON CURRENT ASSET (OR DISPOSAL GROUP) CLASSIFIED AS HELD FOR SALE:-

  • An entity is required to present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the balance sheet.
  • The liabilities of a disposal group classified as held for sale should be presented separately from other liabilities in the balance sheet. Those assets and liabilities should not be offset and presented as a single amount.

DISCLOSURE

An entity should disclose the following information in the notes to the financial statement in the period in which a non-current Asset (or Disposal Group) has been either classified as held for Sale or Sold.

  • Description of the non-current asset (or disposal group);
  • Description of facts and circumstances of the sale, or leading to the expected disposal and the expected manner and timing of that disposal;
  • Gain or loss recognised and if not presented separately on the face of the income statement, the caption in the income statement that includes that gain or loss.
  • if applicable, the reportable segment in which the non-current asset (or disposal group) is presented in accordance Ind AS 108 Operating Segments.
  • If there is a change of plan to sell, a description of facts and circumstances leading to the decision and its effect on results.

DISCONTINUED OPERATIONS

  • represents a separate major line of business or geographical area of operations; or
  • is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
  • is a subsidiary acquired exclusively with a view to resale.

Author Bio

Qualification: CA in Practice
Company: harishankerand co
Location: GHAZIABAD, Uttar Pradesh, IN
Member Since: 05 Feb 2020 | Total Posts: 4
I am CA HARI SHANKER(Practicing CA Since 5 yrs) Consultant all Taxation and Accounting Matters View Full Profile

My Published Posts

More Under CA, CS, CMA

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

December 2020
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
28293031