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Thread: 05 - Indian Accounting Standard (Ind AS) 105 - Non-current Assets Held for Sale and Discontinued Operations

  1. #21
    IND-AS
    Guest

    Thumbs up Allocation of an impairment loss on a disposal group of Indian Accounting Standard (Ind AS) 105

    Allocation of an impairment loss on a disposal group of Indian Accounting Standard (Ind AS) 105

    Non-current Assets Held for Sale and Discontinued Operations


    Allocation of an impairment loss on a disposal group

    Paragraph 23 of the Indian Accounting Standard requires an impairment loss (or any subsequent gain) recognised for a disposal group to reduce (or increase) the carrying amount of the non-current assets in the group that are within the scope of the measurement requirements of the Indian Accounting Standard, in the order of allocation set out in paragraphs 104 and 122 of Ind AS 36. Example 10 illustrates the allocation of an impairment loss on a disposal group.

    Example - 10

    An entity plans to dispose of a group of its assets (as an asset sale). The assets form a disposal group, and are measured as follows:


    Carrying amount at the
    end of the reporting period
    before classification as
    held for sale
    Carrying amount as
    Remeasured immediately before classification as held for sale

    Rs
    Rs
    Goodwill
    1,500
    1,500
    Property, plant and equipment (carried at revalued amounts)
    4,600
    4,000
    Property, plant and equipment (carried at cost)
    5,700
    5,700
    Inventory
    2,400
    2,200
    AFS financial assets
    1,800
    1,500
    Total
    16,000
    14,900

    The entity recognises the loss of Rs 1,100 (Rs16,000 – Rs14,900) immediately before classifying the disposal group as held for sale.

    The entity estimates that fair value less costs to sell of the disposal group amounts to Rs13,000. Because an entity measures a disposal group classified as held for sale at the lower of its carrying amount and fair value less costs to sell, the entity recognises an impairment loss of Rs1,900 (Rs14,900 – Rs13,000) when the group is initially classified as held for sale.

    The impairment loss is allocated to non -current assets to which the measurement requirements of the Indian Accounting Standard are applicable. Therefore, no impairment loss is allocated to inventory and AFS financial assets. The loss is allocated to the other assets in the order of allocation set out in paragraphs 104 and 122 of Ind AS 36.

    The allocation can be illustrated as follows:


    Carrying amount
    as remeasured
    immediately
    before classification as
    held for sale
    Allocated
    impairment loss
    Carrying
    amount after
    allocation of
    impairment
    loss

    Rs
    Rs
    Rs
    Goodwill
    1,500
    (1,500)
    0
    Property, plant and equipment (carried at revalued amounts)
    4,000
    (165)
    3,835
    Property, plant and equipment (carried at cost)
    5,700
    (235)
    5,465
    Inventory
    2,200

    2,200
    AFS financial assets
    1,500

    1,500
    Total
    14,900
    (1,900)
    13,000

    First, the impairment loss reduces any amount of goodwill. Then, the residual loss is allocated to other assets pro rata based on the carrying amounts of those assets.


  2. #22
    IND-AS
    Guest

    Thumbs up Presenting discontinued operations in the statement of profit and loss of Indian Accounting Standard (Ind AS) 105

    Presenting discontinued operations in the statement of profit and loss of Indian Accounting Standard (Ind AS) 105

    Non-current Assets Held for Sale and Discontinued Operations


    Presenting discontinued operations in the statement of profit and loss

    Paragraph - 33 of the Indian Accounting Standard requires an entity to disclose a single amount in the statement of profit and loss for discontinued operations with an analysis in the notes or in a section of the statement of profit and loss separate from continuing operations. Example 11 illustrates how these requirements might be met.

    Example - 11

    XYZ GROUP - STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED
    31 DECEMBER 20X2 (illustrating the classification of expenses by function)
    (Rupees in thousands)
    20X2
    20X2
    Continuing operations


    Revenue
    X
    X
    Cost of sales
    (X)
    (X)
    Gross profit
    X
    X
    Other income
    X
    X
    Distribution costs
    (X)
    (X)
    Administrative expenses
    (X)
    (X)
    Other expenses
    (X)
    (X)
    Finance costs
    (X)
    (X)
    Share of profit of associates
    X
    X
    Profit before tax
    X
    X
    Income tax expense
    (X)
    (X)
    Profit for the period from continuing
    operations





    Discontinued operations


    Profit for the period from
    discontinued operations8
    X
    X
    Profit for the period
    X
    X
    Attributable to:

    Owners of the parent

    Profit for the period from continuing operations
    X
    X
    Profit for the period from
    discontinued operations
    X
    X
    Profit for the period
    attributable to owners of the
    parent
    X
    X
    Non-controlling interests

    Profit for the period from continuing operations
    X
    X
    Profit for the period from
    discontinued operations
    X
    X
    Profit for the period
    attributable to non-controlling
    interests
    X
    X

    X
    X

    Note -

    8
    The required analysis would be given in the notes.

    Last edited by IND-AS; 28-02-2011 at 04:44 PM.

  3. #23
    IND-AS
    Guest

    Thumbs up Presenting non-current assets or disposal groups classified as held for sale of Indian Accounting Standard (Ind AS) 105

    Presenting non-current assets or disposal groups classified as held for sale of Indian Accounting Standard (Ind AS) 105

    Non-current Assets Held for Sale and Discontinued Operations


    Presenting non-current assets or disposal groups classified as held for sale

    Paragraph - 38 of the Indian Accounting Standard requires an entity to 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 are also presented separately from other liabilities in the balance sheet. Those assets and liabilities are not offset and presented as a single amount. Example 12 illustrates these requirements.

    Example - 12

    At the end of 20X5, an entity decides to dispose of part of its assets (and directly associated liabilities). The disposal, which meets the criteria in paragraphs 7 and 8 to be classified as held for sale, takes the form of two disposal groups, as follows:

    Carrying amount after classification
    as held for sale

    Disposal group I:
    Disposal group II:

    Rs
    Rs
    Property, plant and equipment
    4,900
    1,700
    AFS financial asset
    1,4009

    Liabilities
    (2,400)
    (900)
    Net carrying amount of
    disposal group
    3,900
    800

    The presentation in the entity’s balance sheet of the disposal groups classified as held for sale can be shown as follows:


    20X5
    20X4
    ASSETS

    Non-current assets


    AAA
    X
    X
    BBB
    X
    X
    CCC
    X
    X

    X
    X
    Current assets


    DDD
    X
    X
    EEE
    X
    X

    X
    X



    Non-current assets classified as held for sale
    8,000


    X
    X
    Total assets
    X
    X



    EQUITY AND LIABILITIES

    Equity attributable to owners of the parent


    FFF
    X
    X
    GGG
    X
    X



    Amounts recognised in other comprehensive income and accumulated in equity relating to non -current assets held for sale
    400


    X
    X
    Non-controlling interests
    X
    X
    Total equity
    X
    X



    Non-current liabilities


    HHH
    X
    X
    III
    X
    X
    JJJ
    X
    X

    X
    X
    Current liabilities


    KKK
    X
    X
    LLL
    X
    X
    MMM
    X
    X
    Liabilities directly associated with non-current assets
    classified as held for sale
    3,300


    X
    X
    Total liabilities
    X
    X
    Total equity and liabilities
    X
    X

    The presentation requirements for assets (or disposal groups) classified as held for sale at the end of the reporting period do not apply retrospectively. The comparative balance sheet for any previous periods are therefore not re -presented.


  4. #24
    IND-AS
    Guest

    Thumbs up Measuring and presenting subsidiaries acquired with a view to resale and classified as held for sale of Indian Accounting Standard (Ind AS) 105

    Measuring and presenting subsidiaries acquired with a view to resale and classified as held for sale of Indian Accounting Standard (Ind AS) 105

    Non-current Assets Held for Sale and Discontinued Operations


    Measuring and presenting subsidiaries acquired with a view to resale and classified as held for sale

    A subsidiary acquired with a view to sale is not exempt from consolidation in accordance with Ind AS 27 Consolidated and Separate Financial Statements. However, if it meets the criteria in paragraph 11, it is presented as a disposal group classified as held for sale. Example 13 illustrates these requirements.

    Example - 13

    Entity A acquires an entity H, which is a holding company with two subsidiaries, S1 and S2. S2 is acquired exclusively with a view to sale and meets the criteria to be classified as held for sale. In accordance with paragraph 32(c), S2 is also a discontinued operation.

    The estimated fair value less costs to sell of S2 is Rs135. A accounts for S2 as follows:


    • initially, A measures the identifiable liabilities of S2 at fair value, say at Rs 40


    • initially, A measures the acquired assets as the fair value less costs to sell of S2 (Rs 135) plus the fair value of the identifiable liabilities ( Rs40), ie at Rs175


    • at the end of the reporting period, A remeasures the disposal group at the lower of its cost and fair value less costs to sell, say at Rs130. The liabilities are remeasured in accordance with applicable Indian Accounting Standards, say at Rs35. The total assets are measured at Rs130 + Rs35, ie at Rs165


    • at the end of the reporting period, A presents the assets and liabilities separately from other assets and liabilities in its consolidated financial statements as illustrated in Example 12 Presenting non-current assets or disposal groups classified as held for sale , and


    • in the statement of profit and loss, A presents the total of the post -tax profit or loss of S2 and the post-tax gain or loss recognised on the subsequent remeasurement of S2, which equals the remeasurement of the disposal group from Rs135 to Rs 130.

    Further analysis of the assets and liabilities or of the change in value of the disposal group is not required.


  5. #25
    IND-AS
    Guest

    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 105 - Non-current Assets Held for Sale and Discontinued Operations

    Appendix - 1 of Indian Accounting Standard (Ind AS) 105

    Non-current Assets Held for Sale and Discontinued Operations


    Appendix - 1

    Comparison with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations

    Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 105 and the corresponding International Financial Reporting Standard (IFRS) 5, Non-current Assets Held for Sale and Discontinued Operations issued by the International Accounting Standards Board .

    1. The transitional provisions given in IFRS 5 have not been given in Ind AS 105, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards.

    2. Different terminology is used in this standard, e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of profit and loss’ is used instead of ‘Statement of comprehensive income’. Words ‘approval of the financial statements for issue have been used instead of ‘authorisation of the financial statements for issue ’ in the context of financial statements considered for the purpose of events after the reporting period.

    3. Requirements regarding presentation of dis continued operations in the separate income statement, where separate income statement is presented under paragraph 33A of IFRS 5 have been deleted. This change is consequential to the removal of option regarding two statement approach in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss. However, paragraph number 33A has been retained in Ind AS 105 to maintain consistency with paragraph numbers of IFRS 5.


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