Ind AS 105, Non current assets held for sale and discontinued operations

By Raju Choudhary 0

Ind AS 105, Non current Assets Held for Sale and Discontinued Operations: The objective of Ind AS 105 is to specify the accounting for assets held for sale, and  the  presentation and disclosure of discontinued operations. In particular, the Ind AS requires:

  • 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;
  • 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

The Ind AS 105:

  • adopts the classification ‘held for sale’.
  • 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
  • classifies an operation as discontinued at the date the operation meets the criteria to be classified as held for sale or when the entity has disposed of the operation.

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.

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. Thus, an  asset (or disposal group) cannot be  classified  as a non-current asset (or disposal group) held for sale,  if  the entity  intends to sell it in a distant future.

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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 programme 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 of the Standard, 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.

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

  • represents a separate major line of business or geographical area of operations;
  • is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
  • is a subsidiary acquired exclusively with a view to

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.

An entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned.

Difference Between AS 24 and Ind AS 105

AS 24 Ind AS 105
AS 24 deals with the discontinuing operations only. Ind AS 105 deals with discontinued operations, which are either disposed off or are held for sale.
Under AS 24, such detailed and separate guidance is not available. Such assets continue to be governed by AS 10, 26 and 28. Ind AS 105 gives detailed guidance on treatment of non current assets or disposal groups, which are classified as “held for sale” or “held for distribution to owners”.
AS 24 specifies the initial disclosure event in respect of a discontinuing operation. Ind AS 105 does not mention the initial disclosure event in respect to a discontinuing operation as it deals only with discontinued operations.
As per AS 24, the assets which are to be abandoned, are classified as “discontinuing operation” Ind AS 105 specifically states that the assets, which are to be abandoned, should not be classified as held for sale.
As per AS 24, a discontinuing operation is:

a component of an entity that represents the major line of business or geographical area, that can be distinguished operationally and for financial reporting purposes.

 As per Ind AS 105, a discontinued operation is:

  • a component of an entity that represents a separate major line of business or geographical area, or
  • is a subsidiary acquired exclusively with an intention of resale
AS 24 does not give any specific guidance regarding this aspect. Ind AS 105 provides guidance on the accounting entries to be made in the books, when the enterprise changes its plan to sell the non current assets or disposal group, which are already classified as held for sale.
AS 24 does not specify any time period in this regard as it relates to discontinuing operations. Ind AS 105 requires that the disposal  of the assets should get completed within one year, subject to limited exceptions.

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