All about Ind AS 105 for non-current assets held for sale and discontinued operations

[ecis2016.org] The Indian accounting standard 105 (Ind AS 105) sets accounting norms for non-current assets held for sale and discontinued operations

While presenting their financial statements, corporates are also liable to provide disclosures about their non-current assets. The Indian accounting standard 105 (Ind AS 105) prescribes norms for disclosure of non-current assets held for sale and discontinued operations.

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What is a non-current asset under Ind AS 105?

Under the accounting norms, an asset that does not meet the definition of a current asset, is a non-current asset. By definition, companies can categorise an asset as current when:

• They expect to realise the asset or intend to sell or consume it in its normal operating cycle.
• They hold the asset primarily for the purpose of trading.
• They expect to realise the asset within 12 months after the reporting period.
• The asset is cash or a cash equivalent as defined in the Ind AS 7, unless the asset is restricted from being exchanged or used to settle a liability.

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Objective and scope of Ind AS 105

This standard covers:

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(a) Assets that meet the criteria to be classified as held for sale, to be measured at the lower of its carrying amount and fair value, minus costs to sell and depreciation on such assets.

(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.

The classification and presentation requirements of this standard, apply to all recognised non-current assets and to all disposal groups of a company. The measurement requirements of this standard apply to all recognised non-current assets and disposal groups except for:

• Deferred tax assets.
• Assets arising from employee benefits.
• Financial assets.
• Non-current assets that are measured at fair value, minus costs to sell, in accordance with Ind AS 41.
• Contractual rights under insurance contracts as defined in Ind AS 104.

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Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners

Companies should 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.

Measurement under Ind AS 105

Companies must measure a non-current asset classified as held for sale, at the lower of its carrying amount and fair value less costs to sell. They should measure a non-current asset classified as held for distribution to owners at the lower of its carrying amount and fair value less costs to distribute.

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Presentation and disclosure under Ind AS 105

Companies should present and disclose information that enables users of the financial statements, to evaluate the financial effects of discontinued operations and disposals of non-current assets.

Companies should disclose the following information in the notes, in the period in which a non-current asset has been either classified as held for sale or sold:

(a) Description of the non-current asset.

(b) 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) Gain or loss.

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