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AASB 5 Standards/Accounting & Auditing as made
The purpose of AASB 5 is to specify the accounting for non-current assets held for sale and the presentation and disclosure of discontinued operations.
Administered by: Treasury
General Comments: When applicable, this Standard supersedes AASB 1042 - Discontinuing Operations - August 2000.
Exempt from sunsetting by the Legislation (Exemptions and Other Matters) Regulation 2015 s12 item 18
Registered 01 Jun 2005
Tabling HistoryDate
Tabled Senate30-Aug-2004
Tabled HR16-Nov-2004
Gazetted 22 Jul 2004
Date of repeal 31 Dec 2017
Repealed by AASB 5 - Non-current Assets Held for Sale and Discontinued Operations - August 2015
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Obtaining a Copy of this Accounting Standard
CONTENTS
Preface
Reasons for Issuing AASB 5
Main Features of this Standard
Application Date
First-time Application and Comparatives
Main Requirements
Differences between this Standard and AASB 1042
Comparison with International Pronouncements
AASB 5 and IFRS 5
Compliance with IFRS 5
AASB 5 and IPSASs
ACCOUNTING STANDARD AASB 5
aCCOUNTING STANDARD AASB 5
Objective
Application
Scope
Classification of Non-current Assets (or Disposal Groups) as Held for Sale
Non-current assets that are to be abandoned
Measurement of a Non-current Assets (or Disposal Group) Classified as Held for Sale
Measurement of a non-current asset (or disposal group)
Recognition of impairment losses and reversals
Changes to a plan of sale
Presentation and Disclosure
Presenting discontinued operations
Gains or losses relating to continuing operations
Presentation of a non-current asset or disposal group classified as held for sale
Additional disclosures
Transitional Provisions
Effective Date of IFRS 5
Withdrawal of IAS 35
Appendix A
Defined Terms
Appendix B
Application Supplement
Extension of the period required to complete a sale
Differences Between AASB 5 AND AASB 1042
Introduction
Differences
A. Incompatibilities between AASB 1042 and AASB 5
A.1 Measurement of non-current assets and disposal groups held for sale
A.2 Newly acquired assets held for resale
A.3 Depreciation of assets held for sale
A.4 Extraordinary items
B. AASB 1042 is more detailed or restrictive
B.1 Borrowing costs expense
C. AASB 5 is more detailed or restrictive
C.1 Discontinued operation
C.2 Disclosure on the face of the income statement
C.3 Classification of held for sale assets as current assets
D. AASB 1042 disclosures are more extensive
D.1 Disclosure of results for newly acquired subsidiaries held for resale
D.2 Description of the discontinuing operation
E. AASB 5 disclosures are more extensive
E.1 Post-tax profit or loss of discontinued operations
E.2 Presentation of held for sale assets in the balance sheet

Accounting Standard

AASB 5

July 2004

 

 

 

 

Non-current Assets Held for Sale and Discontinued Operations

 



Obtaining a Copy of this Accounting Standard

This Standard is available on the AASB website: www.aasb.com.au.

Alternatively, printed copies of this Standard are available for purchase by contacting:

 

The Customer Service Officer

Australian Accounting Standards Board

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AUSTRALIA

 

 

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AUSTRALIA

 

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COPYRIGHT

 

© 2004 Commonwealth of Australia

 

This AASB Standard contains International Accounting Standards Committee Foundation copyright material.  Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source.  Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to The Administration Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007.

All existing rights in this material are reserved outside Australia.

Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.  Further information and requests for authorisation to reproduce for commercial purposes outside Australia should be addressed to the International Accounting Standards Committee Foundation at www.iasb.org.

 

ISSN 1036-4803


CONTENTS

Preface

Comparison With International Pronouncements

Accounting Standard

AASB 5 Non-current Assets Held for Sale and Discontinued Operations

                                                                                                               Paragraphs

Objective                                                                                                                 1

Application                                                                                  Aus1.1 – Aus1.8

Scope                                                                                                                 2 – 5

Classification of Non-current Assets (or Disposal Groups)
as Held for Sale                                                                                           6 – 12

Non-current Assets that are to be Abandoned                              13 – 14

Measurement of Non-current Assets (or Disposal Groups) Classified as Held for Sale         

Measurement of non-current assets (or disposal groups)            15 – 19

Recognition of impairment losses and reversals                             20 – 25

Changes to a plan of sale                                                                    26 – 29

Presentation and Disclosure                                                                              30

Presenting discontinued operations                                                 31 – 36

Gains or losses relating to continuing operations                                  37

Presentation of a non-current asset or disposal group classified as held for sale            38 – 40

Additional disclosures                                                                        41 – 42

 

Appendices:

A.  Defined Terms                                                                                     Page 21

B.  Application Supplement                                                                     Page 24

 

IMPLEMENTATION GUIDANCE (see separate booklet)

DIFFERENCES BETWEEN AASB 5 AND AASB 1042                      Page 26

BASIS FOR CONCLUSIONS ON IFRS 5
(available to AASB online subscribers or through the IASB)


Australian Accounting Standard AASB 5 Non-current Assets Held for Sale and Discontinued Operations is set out in paragraphs 1 – 42 and in Appendices A – B.  All the paragraphs have equal authority.  Paragraphs in bold type state the main principles.  Terms defined in this Standard are in italics the first time they appear in the Standard.  AASB 5 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation and Application of Standards, which identifies the UIG Interpretations.  In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

 


Preface

Reasons for Issuing AASB 5

The Australian Accounting Standards Board (AASB) is implementing the Financial Reporting Council’s policy of adopting the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1 January 2005.  The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities.  Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment.  Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues.

The IASB defines International Financial Reporting Standards (IFRSs) as comprising:

(a)       International Financial Reporting Standards;

(b)      International Accounting Standards; and

(c)       Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).

The Australian equivalents to IFRSs are:

(a)       Accounting Standards issued by the AASB that are equivalent to Standards issued by the IASB, being AASBs 1 – 99 corresponding to the IFRS series and AASBs 101 – 199 corresponding to the IAS series; and

(b)      UIG Interpretations issued by the AASB corresponding to the Interpretations adopted by the IASB, as listed in AASB 1048 Interpretation and Application of Standards.

Main Features of this Standard

Application Date

This Standard is applicable to annual reporting periods beginning on or after 1 January 2005.  To promote comparability among the financial reports of Australian entities, early adoption of this Standard is not permitted. 

First-time Application and Comparatives

Application of this Standard will begin in the first annual reporting period beginning on or after 1 January 2005 in the context of adopting all Australian equivalents to IFRSs.  The requirements of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, the Australian equivalent of IFRS 1 First-time Adoption of International Financial Reporting Standards, must be observed.  AASB 1 requires prior period information, presented as comparative information, to be restated as if the requirements of this Standard had always applied.  This differs from previous Australian requirements where changes in accounting policies did not require the restatement of the income statement and balance sheet of the preceding period.

Main Requirements

This Standard:

(a)       adopts the classification “held for sale”;

(b)      introduces the concept of a “disposal group”, being a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction;

(c)       specifies that assets or disposal groups that are classified as held for sale are carried at the lower of carrying amount and fair value less costs to sell;

(d)      specifies that an asset classified as held for sale, or included within a disposal group that is classified as held for sale, is not depreciated;

(e)       specifies that an asset classified as held for sale, and the assets and liabilities included within a disposal group classified as held for sale, are presented separately on the face of the balance sheet;

(f)       classifies an operation as a discontinued operation at the date when the operation meets the criteria to be classified as held for sale or when the entity has actually disposed of the operation;

(g)      requires the results of the discontinued operation to be shown separately on the face of the income statement; and

(h)      prohibits the classification of an operation as discontinued at the reporting date, when the criteria for that classification are met after the reporting date and before the authorisation of the financial report for issue.

Differences between this Standard and AASB 1042

The primary differences between this Standard and the AASB Standard that it supersedes, AASB 1042 Discontinuing Operations, are the measurement and presentation requirements for non-current assets or disposal groups classified as held for sale, and the timing and classification requirements for an operation to be classified as discontinued.

A more detailed description of the differences between this Standard and AASB 1042 accompanies this Standard under the heading “Differences between AASB 5 and AASB 1042”.

 


Comparison with International Pronouncements

AASB 5 and IFRS 5

AASB 5 is equivalent to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations issued by the IASB.  Paragraphs that have been added to this Standard (and do not appear in the text of the equivalent IASB standard) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering.

Compliance with IFRS 5

Entities that comply with AASB 5 will simultaneously be in compliance with IFRS 5, except for government departments that restructure administrative arrangements or administered activities.

AASB 5 and IPSASs

International Public Sector Accounting Standards (IPSASs) are issued by the Public Sector Committee of the International Federation of Accountants.

There is no specific IPSAS dealing with the measurement of non-current assets to be disposed of or the presentation of discontinued operations at present.

 


ACCOUNTING STANDARD AASB 5

The Australian Accounting Standards Board makes Accounting Standard AASB 5 Non-current Assets Held for Sale and Discontinued Operations under section 334 of the Corporations Act 2001.

 

 

D.G. Boymal

Dated 15 July 2004

Chair – AASB

 

 

aCCOUNTING STANDARD AASB 5

Non-current Assets Held for Sale and Discontinued Operations

Objective

1         The objective of this Standard is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations.  In particular, the Standard 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 on the face of the balance sheet and the results of discontinued operations to be presented separately in the income statement.

Application

Aus1.1          This Standard applies to:

(a)       each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;

(b)       general purpose financial reports of each other reporting entity; and

(c)       financial reports that are, or are held out to be, general purpose financial reports.

Aus1.2          This Standard applies to annual reporting periods beginning on or after 1 January 2005.

Aus1.3          This Standard shall not be applied to annual reporting periods beginning before 1 January 2005.

Aus1.4          The requirements specified in this Standard apply to the financial report where information resulting from their application is material in accordance with AASB 1031 Materiality.

Aus1.5          When applicable, this Standard supersedes AASB 1042 Discontinuing Operations as notified in the Commonwealth of Australia Gazette No S 456, 22 August 2000.

Aus1.6          AASB 1042 remains applicable until superseded by this Standard.

Aus1.7          Notice of this Standard was published in the Commonwealth of Australia Gazette No S 294, 22 July 2004.

Aus1.8          A requirement in an Australian Accounting Standard to restate comparative information does not, of itself, give rise to a requirement to replace the original financial report for the preceding period.

Scope

2         The classification and presentation requirements of this Standard apply to all recognised non-current assets[1] and to all disposal groups of an entity.  The measurement requirements of this Standard apply to all recognised non-current assets and disposal groups (as set out in paragraph 4), except for those assets listed in paragraph 5 which shall continue to be measured in accordance with the Standard noted.

Aus2.1          The requirements in this Standard do not apply to:

(a)       the restructuring of administrative arrangements of government departments; and

(b)       the restructuring of administered activities of government departments.

Aus2.2          AAS 29 Financial Reporting by Government Departments includes requirements for the disclosure of assets, liabilities, items of equity, revenues and expenses resulting from the restructuring of administrative arrangements between government departments.

Aus2.3          An administered activity of a government department does not give rise to revenues and expenses of the department reporting the administered activity and therefore, from the point of view of the department, the discontinuance of an administered activity does not give rise to a discontinued operation.  However, if a government were to discontinue an activity that one of its departments had disclosed as an administered activity, from the point of view of that government the discontinuance may constitute a discontinued operation.

Aus2.4          Although AAS 27 Financial Reporting by Local Governments contains requirements relating to the restructuring of local governments, these requirements only apply to the local government receiving assets or liabilities as a result of the restructuring.  This Standard applies to the local government transferring assets and liabilities where the restructuring results in a discontinued operation of the transferor local government. 

3         Assets classified as non-current in accordance with AASB 101 Presentation of Financial Statements shall not be reclassified as current assets until they meet the criteria to be classified as held for sale in accordance with this Standard.  Assets of a class that an entity would normally regard as non-current that are acquired exclusively with a view to resale shall not be classified as current unless they meet the criteria to be classified as held for sale in accordance with this Standard.

4         Sometimes an entity disposes of a group of assets, possibly with some directly associated liabilities, together in a single transaction.  Such a disposal group may be a group of cash-generating units, a single cash-generating unit, or part of a cash-generating unit[2].  The group may include any assets and any liabilities of the entity, including current assets, current liabilities and assets excluded by paragraph 5 from the measurement requirements of this Standard.  If a non-current asset within the scope of the measurement requirements of this Standard is part of a disposal group, the measurement requirements of this Standard apply to the group as a whole, so that the group is measured at the lower of its carrying amount and fair value less costs to sell.  The requirements for measuring the individual assets and liabilities within the disposal group are set out in paragraphs 18, 19 and 23.

5         The measurement provisions of this Standard[3] do not apply to the following assets, which are covered by the Australian Accounting Standards listed, either as individual assets or as part of a disposal group:

(a)       deferred tax assets (AASB 112 Income Taxes);

(b)      assets arising from employee benefits (AASB 119 Employee Benefits);

(c)       financial assets within the scope of AASB 139 Financial Instruments: Recognition and Measurement;

(d)      non-current assets that are accounted for in accordance with the fair value model in AASB 140 Investment Property;

(e)       non-current assets that are measured at fair value less estimated point-of-sale costs in accordance with AASB 141 Agriculture; and

(f)       contractual rights under insurance contracts as defined in AASB 4 Insurance Contracts.

Classification of Non-current Assets (or Disposal Groups) as Held for Sale

6         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.

7         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.

8         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 program 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, 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         Events or circumstances may extend the period to complete the sale beyond one year.  An extension of the period required to complete a sale does not preclude an asset (or disposal group) from being classified as held for sale if the delay is caused by events or circumstances beyond the entity’s control and there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group).  This will be the case when the criteria in Appendix B are met.

10       Sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance in accordance with AASB 116 Property, Plant and Equipment.

11       When an entity acquires a non-current asset (or disposal group) exclusively with a view to its subsequent disposal, it shall classify the non-current asset (or disposal group) as held for sale at the acquisition date only if the one-year requirement in paragraph 8 is met (except as permitted by paragraph 9) and it is highly probable that any other criteria in paragraphs 7 and 8 that are not met at that date will be met within a short period following the acquisition (usually within three months).

12       If the criteria in paragraphs 7 and 8 are met after the reporting date, an entity shall not classify a non-current asset (or disposal group) as held for sale in the financial report when issued.  However, when those criteria are met after the reporting date but before the authorisation of the financial report for issue, the entity shall disclose the information specified in paragraph 41(a), (b) and (d) in the notes.

Non-current assets that are to be abandoned

13       An entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned.  This is because its carrying amount will be recovered principally through continuing use.  However, if the disposal group to be abandoned meets the criteria in paragraph 32(a)-(c), the entity shall present the results and cash flows of the disposal group as discontinued operations in accordance with paragraphs 33 and 34 at the date on which it ceases to be used.  Non-current assets (or disposal groups) to be abandoned include non-current assets (or disposal groups) that are to be used to the end of their economic life and non-current assets (or disposal groups) that are to be closed rather than sold.

14       An entity shall not account for a non-current asset that has been temporarily taken out of use as if it had been abandoned.

Measurement of a Non-current Assets (or Disposal Group) Classified as Held for Sale

Measurement of a non-current asset (or disposal group)

15       An entity shall measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell.

16       If a newly acquired asset (or disposal group) meets the criteria to be classified as held for sale (see paragraph 11), applying paragraph 15 will result in the asset (or disposal group) being measured on initial recognition at the lower of its carrying amount had it not been so classified (for example, cost) and fair value less costs to sell.  Hence, if the asset (or disposal group) is acquired as part of a business combination, it shall be measured at fair value less costs to sell.

17       When the sale is expected to occur beyond one year, the entity shall 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.

18       Immediately before the initial classification of the asset (or disposal group) as held for sale, the carrying amounts of the asset (or all the assets and liabilities in the group) shall be measured in accordance with applicable Australian Accounting Standards.

19       On subsequent remeasurement of a disposal group, the carrying amounts of any assets and liabilities that are not within the scope of the measurement requirements of this Standard, but are included in a disposal group classified as held for sale, shall be remeasured in accordance with applicable Australian Accounting Standards before the fair value less costs to sell of the disposal group is remeasured.

Recognition of impairment losses and reversals

20       An entity shall 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 paragraph 19.

21       An entity shall 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 Standard or previously in accordance with AASB 136 Impairment of Assets.

22       An entity shall recognise a gain for any subsequent increase in fair value less costs to sell of a disposal group:

(a)       to the extent that it has not been recognised in accordance with paragraph 19; but

(b)      not in excess of the cumulative impairment loss that has been recognised, either in accordance with this Standard or previously in accordance with AASB 136, on the non-current assets that are within the scope of the measurement requirements of this Standard.

23       The impairment loss (or any subsequent gain) recognised for a disposal group shall reduce (or increase) the carrying amount of the non-current assets in the group that are within the scope of the measurement requirements of this Standard, in the order of allocation set out in paragraphs 104(a) and (b) and 122 of AASB 136.

24       A gain or loss not previously recognised by the date of the sale of a non-current asset (or disposal group) shall be recognised at the date of derecognition.  Requirements relating to derecognition are set out in:

(a)       paragraphs 67-72 of AASB 116 for property, plant and equipment; and

(b)      paragraphs 112-117 of AASB 138 Intangible Assets for intangible assets.

25       An entity shall not depreciate (or amortise) a non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale.  Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognised.

Changes to a plan of sale

26       If an entity has classified an asset (or disposal group) as held for sale, but the criteria in paragraphs 7-9 are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale.

27       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, amortisation 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.[4]

28       The entity shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale in income[5] from continuing operations in the period in which the criteria in paragraphs 7-9 are no longer met.  The entity shall present that adjustment in the same income statement caption used to present a gain or loss, if any, recognised in accordance with paragraph 37.

29       If an entity removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the group meets the criteria in paragraphs 7-9.  Otherwise, the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date.  Any non-current assets that do not meet the criteria shall cease to be classified as held for sale in accordance with paragraph 26.


Presentation and Disclosure

30       An entity shall present and disclose information that enables users of the financial report to evaluate the financial effects of discontinued operations and disposals of non-current assets (or disposal groups).

Presenting discontinued operations

31       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.

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

(a)       represents a separate major line of business or geographical area of operations;

(b)      is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

(c)       is a subsidiary acquired exclusively with a view to resale.

33       An entity shall disclose:

(a)       a single amount on the face of the income statement comprising the total of:

(i)        the post-tax profit or loss of discontinued operations; and

(ii)       the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation;

(b)      an analysis of the single amount in (a) into:

(i)        the revenue, expenses and pre-tax profit or loss of discontinued operations;

(ii)       the related income tax expense as required by paragraph 81(h) of AASB 112;

(iii)      the gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation; and

(iv)     the related income tax expense as required by paragraph 81(h) of AASB 112.

The analysis may be presented in the notes or on the face of the income statement.  If it is presented on the face of the income statement it shall be presented in a section identified as relating to discontinued operations, that is, separately from continuing operations.  The analysis is not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition (see paragraph 11).

(c)       the net cash flows attributable to the operating, investing and financing activities of discontinued operations.  These disclosures may be presented either in the notes or on the face of the financial statements.  These disclosures are not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition (see paragraph 11).

34       An entity shall re-present the disclosures in paragraph 33 for prior periods presented in the financial report so that the disclosures relate to all operations that have been discontinued by the reporting date for the latest period presented.

35       Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period shall be classified separately in discontinued operations.  The nature and amount of such adjustments shall be disclosed.  Examples of circumstances in which these adjustments may arise include the following:

(a)       the resolution of uncertainties that arise from the terms of the disposal transaction, such as the resolution of purchase price adjustments and indemnification issues with the purchaser;

(b)      the resolution of uncertainties that arise from and are directly related to the operations of the component before its disposal, such as environmental and product warranty obligations retained by the seller; and

(c)       the settlement of employee benefit plan obligations, provided that the settlement is directly related to the disposal transaction.

36       If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations in accordance with paragraphs 33-35 shall be reclassified and included in income from continuing operations for all periods presented.  The amounts for prior periods shall be described as having been re-presented.

Gains or losses relating to continuing operations

37       Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation shall be included in profit or loss from continuing operations.

Presentation of a non-current asset or disposal group classified as held for sale

38       An entity shall present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the balance sheet.  The liabilities of a disposal group classified as held for sale shall be presented separately from other liabilities in the balance sheet.  Those assets and liabilities shall not be offset and presented as a single amount.  The major classes of assets and liabilities classified as held for sale shall be separately disclosed either on the face of the balance sheet or in the notes, except as permitted by paragraph 39.  An entity shall present separately any cumulative income or expense recognised directly in equity relating to a non-current asset (or disposal group) classified as held for sale.

39       If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition (see paragraph 11), disclosure of the major classes of assets and liabilities is not required.

40       An entity shall not reclassify or re-present amounts presented for non-current assets or for the assets and liabilities of disposal groups classified as held for sale in the balance sheets for prior periods to reflect the classification in the balance sheet for the latest period presented.

Additional disclosures

41       An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or sold:

(a)       a description of the non-current asset (or disposal group);

(b)      a 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)       the gain or loss recognised in accordance with paragraphs 20-22 and, if not separately presented on the face of the income statement, the caption in the income statement that includes that gain or loss; and

(d)      if applicable, the segment in which the non-current asset (or disposal group) is presented in accordance with AASB 114 Segment Reporting.

42       If either paragraph 26 or paragraph 29 applies, an entity shall disclose, in the period of the decision to change the plan to sell the non-current asset (or disposal group), a description of the facts and circumstances leading to the decision and the effect of the decision on the results of operations for the period and any prior periods presented.

Transitional Provisions

43       [Deleted by the AASB]

Effective Date of IFRS 5

44       [Deleted by the AASB]

Withdrawal of IAS 35

45       [Deleted by the AASB]

 


Appendix A

Defined Terms

This appendix is an integral part of AASB 5.

cash-generating unit

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

component of an entity

Operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.

costs to sell

The incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income tax expense.

current asset

An asset that satisfies any of the following criteria:

(a)       it is expected to be realised in, or is intended for sale or consumption in, the entity’s normal operating cycle;

(b)      it is held primarily for the purpose of being traded;

(c)       it is expected to be realised within twelve months after the reporting date; or

(d)      it is cash or a cash equivalent asset unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

discontinued operation

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

(a)       represents a separate major line of business or geographical area of operations;

(b)      is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

(c)       is a subsidiary acquired exclusively with a view to resale.

disposal group

A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.  The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated in accordance with the requirements of paragraphs 80-87 of AASB 136 Impairment of Assets or if it is an operation within such a cash-generating unit.

fair value

The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

firm purchase commitment

An agreement with an unrelated party, binding on both parties and usually legally enforceable, that (a) specifies all significant terms, including the price and timing of the transactions, and (b) includes a disincentive for non-performance that is sufficiently large to make performance highly probable.

highly probable

Significantly more likely than probable.

non-current asset

An asset that does not meet the definition of a current asset.

probable

More likely than not.

recoverable amount

The higher of an asset’s fair value less costs to sell and its value in use.

value in use[6]

The present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

                                  

 


Appendix B

Application Supplement

This appendix is an integral part of AASB 5.

Extension of the period required to complete a sale

B1       As noted in paragraph 9, an extension of the period required to complete a sale does not preclude an asset (or disposal group) from being classified as held for sale if the delay is caused by events or circumstances beyond the entity’s control and there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group).  An exception to the one-year requirement in paragraph 8 shall therefore apply in the following situations in which such events or circumstances arise:

(a)       at the date an entity commits itself to a plan to sell a non-current asset (or disposal group) it reasonably expects that others (not a buyer) will impose conditions on the transfer of the asset (or disposal group) that will extend the period required to complete the sale, and:

(i)        actions necessary to respond to those conditions cannot be initiated until after a firm purchase commitment is obtained; and

(ii)       a firm purchase commitment is highly probable within one year;

(b)      an entity obtains a firm purchase commitment and, as a result, a buyer or others unexpectedly impose conditions on the transfer of a non-current asset (or disposal group) previously classified as held for sale that will extend the period required to complete the sale, and:

(i)        timely actions necessary to respond to the conditions have been taken; and

(ii)       a favourable resolution of the delaying factors is expected;

(c)       during the initial one-year period, circumstances arise that were previously considered unlikely and, as a result, a non-current asset (or disposal group) previously classified as held for sale is not sold by the end of that period, and:

(i)        during the initial one-year period the entity took action necessary to respond to the change in circumstances;

(ii)       the non-current asset (or disposal group) is being actively marketed at a price that is reasonable, given the change in circumstances; and

(iii)      the criteria in paragraphs 7 and 8 are met.

 


Differences Between
AASB 5 AND AASB 1042

This analysis of differences accompanies, but is not part of, AASB 5.

This section identifies differences between AASB 1042 Discontinuing Operations and AASB 5 Non-current Assets Held for Sale and Discontinued Operations under the following headings.

A:       Incompatibilities between AASB 1042 and AASB 5

B:        AASB 1042 is more detailed or restrictive

C:        AASB 5 is more detailed or restrictive

D:       AASB 1042 disclosures are more extensive

E:        AASB 5 disclosures are more extensive

The analysis of differences should not be taken as providing an exhaustive list of differences.

Introduction

AASB 5 addresses the measurement, presentation and disclosures relating to classification of non-current assets as held for sale, disposal groups that comprise assets and associated liabilities to be disposed of in a single transaction and of discontinued operations.  AASB 1042 addresses the presentation and disclosures relating to a discontinuing operation.

Differences

A.        Incompatibilities between AASB 1042 and AASB 5

A.1          Measurement of non-current assets and disposal groups held for sale

AASB 5 requires an entity to measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell (except for newly acquired assets held for resale – see A.2).  The costs to sell must be measured at their present value in the rare circumstance that the sale is expected to occur beyond one year (AASB 5.17).  Where a non-current asset (or disposal group) classified as held for sale no longer meets the held for sale criteria, AASB 5.27 requires the non-current asset to be measured at the lower of its:

(a)       carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation or amortisation that would have been recognised had the asset (or disposal group) not been classified as held or sale; and

(b)      recoverable amount at the date of the subsequent decision not to sell.

AASB 1042 does not prescribe separate measurement requirements for non-current assets to be disposed of – instead, an entity would follow the general measurement requirements of individual Standards, such as AASB 1041 Revaluation of Non-Current Assets that allows entities to carry non-current assets on a cost or a fair value basis or AASB 1010 Recoverable Amount of Non-Current Assets that requires non-current assets measured on a cost basis to be carried at the lower of their carrying amount and recoverable amount.

A.2          Newly acquired assets held for resale

AASB 5.15 and AASB 127 Consolidated and Separate Financial Statements paragraph 12 require a new asset (or disposal group) acquired as part of a business combination that meets the criteria to be classified as held for sale to be measured at fair value less costs to sell.  In contrast, AASB 1015 Acquisition of Assets paragraph 6.1 requires assets to be initially measured at their cost of acquisition at acquisition date.  Cost of acquisition includes the purchase consideration plus any incidental costs directly attributable to the acquisition (AASB 1015.12.1).

A.3          Depreciation of assets held for sale

AASB 5 prohibits an entity from depreciating or amortising a non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale.  AASB 1021 Depreciation paragraph 5.1 requires non-current assets that have limited lives to be depreciated over those useful lives and there is no exception for assets held for sale.  However, a difference between the AASB 5 and AASB 1021 requirements will not occur when a non-current asset that is retired from active use meets the criteria to be classified as held for sale.

A.4          Extraordinary items

AASB 1042.6.4 requires an individual revenue or expense associated with a discontinuing operation that meets the definition of an extraordinary item to be classified as extraordinary.  AASB 1042.6.4.2 comments that the circumstances in which revenues or expenses associated with a discontinuing operation may meet the criteria for classification as an extraordinary item would be rare.  In contrast, AASB 101 Presentation of Financial Statements paragraph 85 specifically prohibits an entity from presenting any items of income and expense as extraordinary items, either on the face of the income statement or in the notes.

B.        AASB 1042 is more detailed or restrictive

B.1          Borrowing costs expense

AASB 1042.6.1.1 comments that a borrowing cost expense is attributed to a discontinuing operation only if the related debt is attributed to the discontinuing operation as a liability.  AASB 5.25 contains a similar requirement for interest to continue to be recognised where it is attributable to the liabilities of a disposal group classified as held for sale.  AASB 1042.6.1.1 provides further commentary stating that a related debt would only be attributable to the discontinuing operation to the extent that:

·              the debt has been used to finance the operation that is now a discontinuing operation; and

·              the debt will be retired as part of the discontinuance.

C.        AASB 5 is more detailed or restrictive

C.1          Discontinued operation

AASB 5.32 requires the classification of an operation as discontinued at the date the operation meets the criteria to be classified as held for sale or when the entity has actually disposed of the operation.  AASB 1042.10.1 requires an entity to classify an operation as discontinuing at the earlier of (a) the entity entering into a binding sale agreement; or (b) the board of directors approving and announcing a formal disposal plan.

C.2          Disclosure on the face of the income statement

AASB 5.33(a) requires the presentation of a single amount on the face of the income statement comprising the total of:

·              the post-tax profit or loss of discontinued operation; and

·              the post-tax gain or loss recognised on the measurement of fair value less costs to sell or disposal of the assets or disposal group(s) comprising the discontinued operations

and AASB 5.33(b) allows an entity to present an analysis of the AASB 5.33(a) disclosures in the notes or on the face of the income statement.  In contrast, AASB 1042.7.2(e) and AASB 1042.7.5 permits the AASB 5.33 disclosures to be presented either in the notes or on the face of the income statement.

C.3          Classification of held for sale assets as current assets

AASB 5.3 requires non-current assets that meet the criteria to be classified as held for sale to be classified as current assets.  In contrast, AASB 1040 Statement of Financial Position paragraph 9.1 defines a current asset as an asset that:

·              is expected to be realised in, or held for sale or consumption in, the normal course of an entity’s operating cycle;

·              is held primarily for trading purposes or for the short-term and is expected to be realised within twelve months of the reporting date; or

·              is cash or a cash equivalent asset which is not restricted in its use beyond twelve months or the length of the operating cycle whichever is greater.

The definition of current asset in accordance with AASB 1040 requires an entity that is intending to dispose of non-current assets within the next twelve months to classify them as current assets.  However, this may not give the same result as AASB 5.3 because AASB 1040 has no specific rules identifying the circumstances that would lead to classification of non-current assets as current.

D.        AASB 1042 disclosures are more extensive

D.1          Disclosure of results for newly acquired subsidiaries held for resale

AASB 1042.7.2(e) and AASB 1042.7.5 require disclosure of an analysis of the post-tax profit or loss of discontinuing operations and the post-tax gain or loss recognised on the measurement of assets and liabilities comprising the discontinuing operation.  In contrast, AASB 5.33(b) does not require this analysis for newly acquired subsidiaries that meet the held for sale criteria.

D.2          Description of the discontinuing operation

AASB 1042.7.2(a) specifically requires a description of each discontinuing operation to be disclosed.  AASB 5 does not contain this requirement in respect of discontinued operations.

E.         AASB 5 disclosures are more extensive

E.1          Post-tax profit or loss of discontinued operations

AASB 5.33(a)(i) requires an entity to disclose the post-tax profit or loss of discontinued operations.  An analysis of this amount is required by AASB 5.33(b)(iii)-(iv).  AASB 1042.7.5 requires only the analysis to be disclosed.

E.2          Presentation of held for sale assets in the balance sheet

AASB 5.38 requires the separate presentation in the balance sheet of non-current assets classified as held for sale, assets in a disposal group and liabilities of a disposal group.  The major classes of assets and liabilities classified as held for sale must be separately disclosed on the face of the balance sheet or in the notes.  Because AASB 1042 does not include a held for sale classification requirement, no such disclosure is required.



[1]      For assets classified according to a liquidity presentation, non-current assets are assets that include amounts expected to be recovered more than twelve months after the reporting date.  Paragraph 3 applies to the classification of such assets.

[2]      However, once the cash flows from an asset or group of assets are expected to arise principally from sale rather than continuing use, they become less dependent on cash flows arising from other assets, and a disposal group that was part of a cash-generating unit becomes a separate cash-generating unit.

[3]      Other than paragraphs 18 and 19, which require the assets in question to be measured in accordance with other applicable Australian Accounting Standards.

[4]      If the non-current asset is part of a cash-generating unit, its recoverable amount is the carrying amount that would have been recognised after the allocation of any impairment loss arising on that cash-generating unit in accordance with AASB 136.

[5]      Unless the asset is property, plant and equipment or an intangible asset that had been revalued in accordance with AASB 116 or AASB 138 before classification as held for sale, in which case the adjustment shall be treated as a revaluation increase or decrease.

[6]      Not-for-profit entities should refer to AASB 136 Impairment of Assets when the future economic benefits of an asset are not primarily dependent on the asset’s ability to generate net cash inflows.