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SLFRS 5 Non Current
Assets Held for Sale and
Discontinued Operations
Sanath Wijesinghe j g
Manager - BDO Partners
27
th
J une 2012
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SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
27
th
June 2012
Outline
introduction
Introduction
ScopeandScopeExclusions
HeldforsaleClassification
HeldforsaleMeasurement
Disposal Groups
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DisposalGroups
Disposalgroups heldforsalemeasurement
DiscontinuedOperations
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
AccountingforAssetsheldforsale
PresentationanddisclosureofDiscontinuedOperations
a. AssetsclassifiedasHFStobemeasuredatthelowerofCAandFVLCS,and
depreciationonsuchassetstocease
b. HFSseparatelyintheSOFPandresultofdiscontinuedoperations separately
inSCI
4 Outline
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Scope in
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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Allrecognisednoncurrentassets
Alldisposalgroups
p
5 Outline
Scoping of NCA held for distribution to
owners
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
SLFRSpara5A
IFRICInterpretation17
BasisforConclusion 60underIFRIC17
6 Outline
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ScopingofNCAheldfordistributiontoownersContd.
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
7 Outline
D f d t t
Scope Exclusion
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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Deferredtaxassets
Assetsarisingfromemployeebenefits
FinancialassetsunderLKAS39
NCAaccountedundertheFVModelinLKAS40
NCAthataremeasuredatFVLCSLKAS41
Contractualrightsunder SLFRS4
8 Outline
5
Held for sale classification
SLFRS 5- Non Current Assets Held for Sale and Discontinued
Operations
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June 2012
Basis iftheassets(ordisposalGroups)carryingamountwillberecovered
principallythroughasaletransactionratherthanthroughcontinuinguse
Criteria;
Availableforimmediatesale
Highlyprobable
Managementcommittedtoplantosell
A ti h b i iti t d Activeprogrammehasbeeninitiated
Assetismarketedatareasonablepricecomparedtofairvalue
Saleexpectedtobecompletedwithin1yearfromdateofclassification
(unlessbeyondtheentityscontrol,e.g.regulatoryapprovalrequiredfor
thesalePara.9andAppendixB).
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DisposalGroup
Outline
Availability for Immediate Sale
Example
SLFRS 5- Non Current Assets Held for Sale and Discontinued
Operations
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June 2012
Example
Anentityiscommittedtoaplantosellitsheadquartersbuildingandhasinitiated
actionstolocateabuyer.
Scenario(a)
Theentityintendstotransferthebuildingtoabuyerafteritvacatesthebuilding.
Thetimenecessarytovacatethebuildingisusualandcustomaryforsalesofsuch
assets.Thecriterionofavailabilityforimmediatesalewouldbemetatthe
plan commitment date plancommitmentdate.
10 Outline
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Availability for Immediate Sale
Example
SLFRS 5- Non Current Assets Held for Sale and Discontinued
Operations
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June 2012
Scenario(b)
Theentitywillcontinuetousethebuildinguntilconstructionofanew
headquartersbuildingiscompleted.Theentitydoesnotintendtotransferthe
existingbuildingtoabuyeruntilafterconstructionofthenewbuildingis
completed(anditvacatestheexistingbuilding).Thedelayinthetimingofthe
transferoftheexistingbuildingimposedbytheentity(seller)demonstratesthat
thebuildingisnotavailableforimmediatesale.Thecriterionavailabilityfor
immediatesale wouldnotbemetuntilconstructionofthenewbuildingis
completed,evenifafirmpurchasecommitmentforthefuturetransferofthe
existingbuildingisobtainedearlier.
11 Outline
Exception - Completion of Sales within 1 Year
SLFRS 5- Non Current Assets Held for Sale and Discontinued
Operations
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June 2012
Anexceptiontotheoneyearrequirementinparagraph8appliesin
limitedsituationsinwhichtheperiodrequiredtocompletethesaleofa
noncurrentasset(ordisposalgroup)willbe(orhasbeen)extendedby
eventsorcircumstancesbeyondanentityscontrolandspecified
conditionsaremet(paragraphs9andB1)
12 Outline
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Exception - Completion of Sales within 1 Year
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Anentityinthepowergeneratingindustryiscommittedtoaplantosella
disposalgroupthatrepresentsasignificantportionofitsregulatedoperations.
Thesalerequiresregulatoryapproval,whichcouldextendtheperiodrequiredto
completethesalebeyondoneyear.Actionsnecessarytoobtainthatapproval
cannotbeinitiateduntilafterabuyerisknownandafirmpurchasecommitment
isobtained.However,afirmpurchasecommitmentishighlyprobablewithinone
year.Inthatsituation,theconditionsinparagraphB1(a)foranexceptiontothe
Example
oneyearrequirementinparagraph8wouldbemet.
13 Outline
Held for sale measurement
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
MeasurenoncurrentassetinaccordancewithapplicableSLFRSs/LKSs
Classifyasheldforsaleandmeasureatlowerof:
carryingamount
fairvaluelesscoststosell
Nosubsequentdepreciation
Discloseseparately
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Back
Outline
8
Disposal group
Disposal group
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Disposalgroup
Agroupofassetsandliabilitiestobedisposedoftogetherinasingle
transaction
Heldforsaleclassification
Samecriteriaassingleassetheldforsale
15 Outline
Disposal groups held for sale measurement
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
MeasureassetsandliabilitiesinaccordancewithapplicableSLFRSs
Classifyasheldforsaleandmeasureatthelowerof:
carryingamountand
fairvaluelesscoststosell
Impairment allocated to SLFRS 5 assets Impairmentallocatedto SLFRS5 assets
NosubsequentdepreciationofSLFRS5assets
Discloseassetsandliabilitiesseparatelyassinglelines donotnetoff
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Allocation of an impairment loss on a disposal group
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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Theimpairmentlossisallocatedtononcurrentassetstowhichthe
measurementrequirementsoftheSLFRSareapplicable.Thelossis
allocatedtotheassetsintheorderofallocationsetoutinparagraphs
104and122ofLKAS36
Example
Microsoft Office
Word Document
17 Outline
Allocationofanimpairmentlossonadisposalgroup
Distribution of NCA to Owners -IFRIC 17
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Sometimesanentitydistributeassetsotherthancash(noncurrentassets)as
dividendstoitsownersactingintheircapacityasowners.
InterpretationappliestoNon reciprocaldistributionsofassetsbyanentitytoits
owners;
Distributionsofnoncashassets(e.g.PPE,BusinessasdefinedinSLFRS3,
OwnershipinterestinanotherentityordisposalgroupasdefinedinSLFRS5)
and
Distributionsthatgiveownersachoiceofreceivingeithernoncashassetsora
cashalternative.
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Distribution of NCA to Owners -IFRIC 17
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
IFRIC17appliesonlytodistributionsinwhichallownersofthesameclassof
equityinstrumentsaretreatedequally.
DoesnotapplytoadistributionofNCAthatisultimatelycontrolledbythesame
partyorpartiesbeforeandafterthedistribution.
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BeforeDistribution
Distribution of NCA to Owners -IFRIC 17
After Distribution
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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Public
Shareholders
CompanyA
Public
Shareholders
CompanyA SubsidiaryB
SubsidiaryB
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Outline
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Rational of Scoping NCA held for Distribution
to Owners
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Whenanentityhasanobligationtodistributeassetstoitsowners,the
carryingamountoftheassetswillnolongerberecoveredprincipally
throughcontinuinguse.TheIFRICdecidedthattheinformationrequired
byIFRS5isimportanttousersoffinancialstatementsregardlessofthe
formofatransaction
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Basis ;
Held for distribution to owners -Classification
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Basis ;
when the entity is committed to distribute the asset (or disposal
group) to the owners.
Criteria
Available for immediate distribution
Highly probable
Actions to complete the distribution must have been initiated Actions to complete the distribution must have been initiated
Should be expected to be completed within one year from the
date of classification.
(probability of shareholders approval should be considered as
part of the assessment of whether the distribution is highly
probable)
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Outline
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Held for distribution to owners measurement
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Classifyasheldfordistributiontoownersandmeasureatthelowerof:
carryingamountand
fairvaluelesscoststodistribute
23 Outline
NCA to be abandoned
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Anentityshallnoclassifyasheldforsaleanoncurrentasset(ordisposalgroup)
thatistobeabandoned.Thisisbecauseitscarryingamountwillberecovered
principallythroughcontinuinguse.However,ifthedisposalgrouptobe
abandonedmeetsrequiredcriteria,theentityshallpresenttheresultsandcash
flowsofthedisposalgroupasdiscontinuedoperationsinaccordancewiththe
guidancegiveninrelevantparagraphsintheStandard.
24 Outline
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NCA to be abandoned
E l
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
InOctober20X9anentitydecidestoabandonallofitscottonmills,which
constituteamajorlineofbusiness.Allworkstopsatthecottonmillsduringthe
yearended31December2010.Inthefinancialstatementsfortheyearended
31December20X9,resultsandcashflowsofthecottonmillsaretreatedas
continuingoperations.Inthefinancialstatementsfortheyearended31
December2010,theresultsandcashflowsofthecottonmillsaretreatedas
discontinuedoperationsandtheentitymakesthedisclosuresrequiredby
Example
p y q y
paragraphs33and34oftheSLFRS.
25 Outline
Discontinued operations definition
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Component ofanentitythatbythebalancesheetdate:
hasbeendisposedof,OR
meetsheldforsalecriteria
AND
representsaseparatemajorlineofbusinessorgeographicalareaof
operation
isapartofasinglecoordinatedplantodisposeofaseparatemajorlineof
b i OR businessOR
isasubsidiaryacquiredwithaviewtoresell
26 Outline
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Discontinued operations - presentation
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Asingleamountinthestatementofcomprehensiveincomecomprising
posttaxprofit/lossofoperationandprofit/lossonmeasurementtofair
valuelesscoststosell(orondisposal)
Furtheranalysisonfaceorinnotes
27 Outline
Presentation and Disclosure
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
IllustrativeExample
Microsoft Office
Word Document
PresentationandDisclosure
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Key points
Di l g b h ld f l d t b di ti d ti
SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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June 2012
Disposal group can be held for sale and not be a discontinued operation
Balance sheet position for assets and disposal groups classified as held for
sale not restated in comparative period
Statement of Comprehensive Income results of discontinued operations
are restated
Abandoned activity at year end may be discontinued but will not be held
for sale
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SLFRS 5- Non Current Assets Held for Sale and Discontinued Operations
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th
June 2012
New Developments
Standard ExistingPara
Reference
Replaced/addedparagraph
SLFRS5 Not
Included
Para5B
This SLFRS specifies the disclosures required in respect of noncurrent
assets (or disposal groups) classified as held for sale or discontinued
operations. Disclosures in other SLFRSs do not apply to such assets (or
disposal groups) unless those SLFRSs require:
(a) specific disclosures in respect of noncurrent assets (or disposal groups)
classified as held for sale or discontinued operations; or
(b) disclosures about measurement of assets and liabilities within a
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disposal group that are not within the scope of the measurement
requirement of SLFRS 5 and such disclosures are not already provided in
the other notes to the financial statements.
Additional disclosures about noncurrent assets (or disposal groups)
classified as held for sale or discontinued operations may be necessary to
comply with the general requirements of LKAS 1, in particular paragraphs
15 and 125 of that Standard
Outline
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