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Similar to Ind AS 105, Non-current assets held for sale and discontinued operations .pptx (20)
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Ind AS 105, Non-current assets held for sale and discontinued operations .pptx
- 1. Indian Accounting Standard (Ind AS) 105 Non-current Assets Held for Sale and Discontinued Operations Megharaja E N
- 2. Objective The objective of this Indian Accounting Standard (Ind AS) is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. In particular, this Ind AS requires: (a) 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; and (b)assets that meet the criteria to be classified as held for sale to be presented separately in the balance sheet and the results of discontinued operations to be presented separately in the statement of profit and loss.
- 3. Summary of application of Ind AS 105 • PPE held for sale • Intangible Asset Held for sale • Investment property held for sale • Investment held for sale- specially Investment in associate, joint venture and subsidies
- 4. Non applicability of this Standards • Deferred tax ( Ind AS 12) • Employee benefits assets ( Ind AS 19) • Financial assets (Ind AS 109) • Biological assets (Ind AS 41) • Insurance contract (Ind AS 104)
- 5. Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners 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.
- 6. Non-current assets to be disposed of are classified as held for sale when the asset is available for immediate sale and the sale is highly probable. Depreciation ceases on the date when the assets (individually or as part of a disposal group) are classified as held for sale. Non-current assets classified as held for sale are measured at the lower of its carrying value and fair value less costs to sell. Non-current assets classified as held for sale, and the assets and liabilities in a disposal group classified as held for sale, are presented separately in the statement of financial position
- 7. Classification For an Asset / disposal group to be classified as held for sale, 3 criteria’s shall be fulfilled. (i) It must be available for immediate sale in its present condition, subject only to terms that are usual and customary for sale of such assets. (ii) Its sale must be highly probable (iii)It must genuinely be sold and not abandoned. The criteria (i) and (ii) shall be met at the reporting date in order to classify the non current asset / disposal group as held for sale 6
- 8. (i) Available for Immediate Sale: To meet the above criteria, there shall be an intention and ability to transfer the asset to the buyer at its present condition. The time taken by seller is usual and customary for sale, then it would be considered as available for immediate sale Changes required for sale are permitted Exception: However any changes that result into restructuring of assets, it is not permitted 7
- 9. (ii) Sale to be highly probable: • The appropriate level of management must be committed to a plan to sell the asset (or disposal group), • An Active programme to locate a buyer and complete the plan must have been initiated. • The asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. • The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, except in certain circumstances the period may be extended beyond one year 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. 9
- 10. Exception of 12 month rule An entity shall be allowed time of more than 12 months permission if all the following conditions are satisfied • Delay is due to circumstances which is not under control of the entity( objectives of subsequent sale) • There must be a sufficient evidence that an entity is still committed to plan of sale 6
- 11. Measurement and Accounting on date of held for sale 1. Calculate carrying amount (CA) of assets or disposal group Particulars Historical cost/ Revalued figure ×× Less: Accumulated Depreciation ×× Less: Accumulated impairment loss ×× Crossing balance ×× 2. Calculate fair value(FV) less cost to sale 3. Compare step 1 and step 2 6
- 12. Measurement and Accounting on date of held for sale 6 CA > FV Difference transfer to P&L A/c CA = FV No treatment CA < FV Ignore
- 13. Measurement and Accounting on subsequent reporting date 6 CA > FV Difference transfer to P&L A/c CA = FV No treatment CA < FV Update previous write down Credited to P&L A/c
- 15. Discontinued operations Presentation: • Profit before tax, tax and profit after tax from such discontinued operations to be shown in P&L account Disclosure: • Revenue and expenses • Related income • Gain/Loss on disposal • Income tax 6