Assets held for sale and discontinued operations

Once a sale is highly probable and the asset is available for immediate sale, depreciation stops and the asset moves to a separate held-for-sale line at the lower of carrying amount and fair value less costs to sell; exiting a major business line triggers discontinued operations presentation. Premature or overly cautious classification both distort reported results - premature classification inflates earnings by stopping depreciation too early and can mask an impairment that should be recognized, while failing to classify at all when criteria are met buries a loss-making or exiting business inside continuing operations and misleads readers about the sustainable earnings base going forward.

Has management committed to a formal plan with an active program to locate a buyer, and is the asset being marketed at a price reasonable relative to its current fair value? Is completion genuinely expected within one year (with only narrow, specific exceptions justifying delay)? Has depreciation stopped from the date the asset met the held-for-sale criteria, and is it now carried at the lower of carrying amount and fair value less costs to sell?

1. Test the 'available for immediate sale' criterion first: the asset (or disposal group) must be sellable in its present condition subject only to terms that are usual and customary for sales of such assets.
2. Test 'highly probable': management must be committed to a plan to sell, there must be an active programme to locate a buyer, the asset must be actively marketed at a price reasonable in relation to its current fair value, and the sale should be expected to complete within one year of classification (with only narrow, specific exceptions for delay).
3. Do not classify on board intention alone - require documented evidence: a signed board resolution/mandate, engagement of a disposal agent, active buyer discussions, or a signed sale and purchase agreement/heads of terms.
4. On the date all criteria are first met, reclassify the asset (or disposal group) to a separate held-for-sale line, cease charging depreciation/amortization from that date, and measure at the lower of carrying amount and fair value less costs to sell, recognizing any resulting impairment in profit or loss immediately.
5. Separately assess whether the disposal represents a discontinued operation - a component that is a major line of business or geographical area, part of a single coordinated disposal plan, or a subsidiary acquired exclusively for resale - which drives separate income statement presentation regardless of whether IFRS 5 balance sheet classification criteria are also met.
6. Reassess the held-for-sale classification at each reporting date: if criteria are no longer met (sale no longer highly probable), reclassify back and measure at the lower of (a) carrying amount had it never been classified as held for sale, adjusted for depreciation/impairment that would have been recognized, and (b) recoverable amount at the date of the decision not to sell.

Basis: lower of carrying amount (at the date of classification, per the entity's existing accounting policies) and fair value less costs to sell (estimated selling price in an orderly transaction less directly attributable incremental costs of disposal, such as legal fees and transaction costs, excluding finance costs and income tax expense). Included: any impairment loss on initial classification (and on subsequent remeasurement at each reporting date while held for sale) is recognized immediately in profit or loss; costs to sell are measured at their present value if the sale is expected beyond one year, with the unwinding of discount recognized as a financing cost. Excluded: depreciation and amortization are not charged from the date of classification as held for sale, even though the asset remains on the balance sheet; equity-accounted investees and some specific asset categories have their own measurement carve-outs. Re-measurement trigger: remeasure at each reporting date at the lower of carrying amount and fair value less costs to sell for as long as the asset remains classified as held for sale; a subsequent increase in fair value less costs to sell can only be recognized as a gain up to the amount of cumulative impairment previously recognized (not above the original pre-impairment carrying amount); if the criteria cease to be met, remeasure and reclassify back to the appropriate asset category as described in the recognition steps above.

Non-current assets (and liabilities, if a disposal group) held for sale presented separately from other assets/liabilities on the face of the statement of financial position, not offset against each other; a single amount for the post-tax profit or loss of discontinued operations presented on the face of the income statement, with an analysis of revenue, expenses, pre-tax result and related tax shown in the notes or on the face; comparative income statement figures restated to re-present the discontinued operation consistently, even though the balance sheet is not restated retrospectively; description of the facts and circumstances of the sale/disposal, expected manner and timing, and the segment in which the asset/disposal group is reported; any impairment loss (and subsequent reversal, if applicable, limited to cumulative impairment previously recognized) recognized on classification or remeasurement, disclosed separately; cash flows from operating, investing and financing activities attributable to discontinued operations.

• Continuing to charge depreciation after the classification date instead of ceasing it immediately once held-for-sale criteria are met
• classifying an asset as held for sale based on board or management intention alone, without an active marketing programme or realistic asking price
• burying a discontinued division'
• s results inside continuing operations line items instead of presenting a single discontinued-operations line with restated comparatives
• failing to reassess classification at each period end, leaving an asset stranded in held-for-sale status long after the one-year/highly-probable criteria have ceased to be met
• measuring the held-for-sale asset only at carrying amount without testing fair value less costs to sell, missing a required impairment.