Ind AS-105: Non-current assets held for Sale and Discontinued operations

(A) Non-Current assets held for sale:

i) Are presented separately from other assets in the Balance Sheet.

Ii) As their classification will change.

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

The Ind AS requires:

• Assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease.
• Assets that meet the criteria to be classified as held for sale to be presented separately in the balance sheet.
• The results of discontinued operations to be presented separately in the statement of profit.

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.

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.

For the sale to be highly probable, 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 of the Standard, 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the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and:

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

A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.  In other words, a component of an entity will have been   a cash-generating unit or a group of cash-generating units while being held for use.

An entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned.

Exception to the period of one year

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

Measurement:

• Depreciation and amortization shall be immediately stopped from the moment the asset has been classified as held for sale.
• An entity should measure a non-current asset (or disposal group) classified as held for sale at the lower of it carrying amount and fair value less costs to sell.
• Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognised.
• 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.
• 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.

Recognition Of Impairment Losses and Reversals:

• 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.
• 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.

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.