IND AS 105 – Non-current assets held for Sale and Discontinued Operations

• Accounting & Bookkeeping
• ||
• September 16, 2021

IND AS 105 describes the accounting treatment for non-current assets held for sale and the presentation and disclosure of discontinued operations. It sets out the criteria for classifying a non-current asset as held for sale and discontinued operations. The objective of Ind AS is to specify the accounting for non- current assets held for sale and the presentation and disclosure of discontinued operations.

In particular, this standard requires in respect of non-current assets that meet the condition to be classified as held for sale:

• To be determined of non-current assets at the lower of carrying amount and fair value fewer costs of such assets to sell, and depreciation on such non-current assets to cease;
• To be presented independently in the balance sheet of the entities; and
• The results of discontinued operations are to be presented separately in the profit and loss statement.

Standards for IND AS 105
Following are the standards for IND AS 105:

• Adopts the classification of non-current assets ‘held for sale;
• It classifies the brief of a disposal group of non-current assets, being a group of non-current assets to be disposed of, by sale or otherwise, together like a group of a single transaction, and liabilities directly related with those non-current assets that will be transferred in the transaction;
• It classifies an operation as discontinued at the date of the operation meets the condition to be classified an asset as held for sale or when the entity has disposed of the operation.

An entity shall analyze a non-current asset as held for sale if such asset carrying amount will be reclaimed principally through a sale transaction of such non-current assets rather than through continuing use of such asset. For this to be the case, the Non- current assets must be present for instant sale in their present situation subject only to usual and customary terms for sales of such non-current assets. In addition, such asset sale must be highly probable. Thus, an Asset can’t be classified as a non-current asset held for sale if the entity aims to sell it in the distant future.

The Ind AS also applies to those Assets which are held for distribution to owners of the entities. The conditions stated for sale as above also applies to the distribution, i.e. distribution has been made within twelve months, including considering the requisite permission for distribution, non-withdrawal of the plan to distribute etc.

Disclosure
An entity should disclose the following information in the notes to the financial statement in the period in which a non-current assest has been either classified as held for sale:

• Description of the non-current asset
• Description of facts and situations of the sale, or leading to the expected disposal and the expected manner and timing of that disposal;
• Gain or loss recognized and if not presented separately on the face of the income statement, the caption in the income statement that comprises the gain or loss.
• If there is a change of plan to sell, a description of facts and circumstances leading to the decision and its effects on results.

A discontinued operation is a part of an entity that either has been disposed of or is classified as held for sale of non-current assets and:

• Display a separate major line of business or geographical area of operations of the entities;
• It is part of only one co-ordinated plan to dispose of a separate major line of business or geographical area of operations of the entities; or
• It is a subsidiary acquired only with a view to resale.

An essential element of an entity involves operations and cash flows that can be distinct, practically and for financial reporting purposes, from the rest of the entity. An entity should not be classified as held for sale a non-current asset that is to be excluded. The Indian Accounting Standard specifies the treatment when there is a change in plan to sale for non-current Assets that were previously classified as held for sale. An entity should represent and disclose information of the entities that enable users of the financial statements of the entities to assess the financial effects of discontinued operations and disposals of non-current assets.

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