Application of Ind AS 105- (Non Current asset held for sale or group disposal) in case the decision is after the reporting period but before the approval of financial statement by board

According to Ind AS 105 (Non-current asset held for sale)

An entity shall classify a non-current asset (or disposal group) as held for, sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. (Para 6)

For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. Thus, an asset (or disposal group) cannot be classified as a non-current asset (or disposal group) held for sale, if the entity intends to sell it in a distant future. (Para 7)

For the sale to be highly probable if,

  • the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and
  • an active programme to locate a buyer and complete the plan must have been initiated.
  • Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition,
  • the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification except as permitted by paragraph 9,

and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The probability of shareholders’ approval (if required in the jurisdiction) should be considered as part of the assessment of whether the sale is highly probable. (Para 8)

Further as required by para 12 of Ind AS:-

If the criteria in paragraphs 7 and 8 are met after the reporting period, an entity shall not classify a non—current asset (or disposal group) as held for sale in those financial statements when issued.

However, when those criteria are met after the reporting period but before the approval of the financial statements for issue, the entity shall disclose the information specified in paragraph 41(a), b and d in the notes.

Disclosure requirement under para 41

An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or sold:

(a) a description of the non-current asset (or disposal group);

(b) a description of the facts and circumstances of the sale, or leading to the expected disposal, and the expected manner and timing of that disposal;

(c) the gain or loss recognised in accordance with paragraphs 20—22 and, if not separately presented in the statement of profit and loss, the caption in the statement of profit and loss that includes that gain or loss;

(d) if applicable, the reportable segment in which the non-current asset (or disposal group) is presented in accordance with Ind AS 108, Operating Segments

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  1. R.S.Pashupathy says:

    A government company is creating certain infrastructure assets that would have to be transferred to the user departments without consideration. Could these infrastructure assets be classified under the disposal group?

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June 2021