NCAHFS & DO

• Noncurrent asset


  An asset that does not meet the definition of a current asset
• 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
• Classifications as Held for Sale

  A NCA (or disposal group) is classified as held for sale or held for distribution to owners if its carrying amount will be recovered principally through a sale transaction rather than continuing use
• Conditions for classification as HFS

  • The NCA or DG is available for immediate sale in its present conditions subject only to terms that are usual and customary
  • The sale is highly probable, as evidenced by the existence of all of the following: The entity's management is COMMITTED on selling the asset, The entity is ACTIVELY locating a buyer, The sale price is REASONABLE in relation to the asset's (or DG's) current fair value, The sales is EXPECTED to be completed within one year from the date of classification, It is UNLIKELY that the plan to sell will be withdrawn
• Highly probable


  Significantly more likely than not
• Probable


  More likely than not
• Firm purchase commitment


  An agreement with an unrelated party, binding on both parties and usually legally enforceable, that specifies all significant terms, including the price and timing of the transactions, and includes disincentive for non-performance that is sufficiently large to make performance highly probable
• Exception to the one-year requirement

  1. Asset (or disposal group) not sold within 1 year from date of classification as held for sale

  2. Asset (or disposal group) reclassified back to previous classification (e.g. from 'held for sale' back to 'PPE')
• Exclusive view of subsequent disposal

  A noncurrent asset (or disposal group) that is acquired exclusively with a view to its subsequent disposal is classified as held for sale at the acquisition date if the "sale within one-year" requirement is met and it is highly probable that the other requirements will be met within a short period of time after the acquisition (usually within three months).
• Conditions for asset (or disposal group) to continue being classified as held for sale

  • Delay caused by events beyond the entity's control
  • Sufficient evidence that the entity remains committed on selling the asset (or disposal group)
• Event after the reporting period

  A noncurrent asset or disposal group that meets the criteria for classification as held for sale only after the reporting period is not classified as held for sale in the current period's financial statements. Meaning, the event is treated as a non-adjusting event after the reporting period.

  
  

  The same treatment is applied to a component of an entity that meets the criteria for classification as discontinued operation only after the reporting period.
• Property dividends


  Noncurrent assets (or disposal groups) declared as property dividends are classified as held for distribution to owners when they are available for immediate distribution in their present condition and the distribution is highly probable. The probability that a further approval (if any) of the dividend declaration will be obtained is considered as part of the assessment of whether the distribution is highly probable.
• Noncurrent assets that are to be abandoned

  A noncurrent asset or disposal group that is to be abandoned is not classified as held for sale because its carrying amount will be recovered through continuing use rather than principally through sale. Noncurrent assets to be abandoned include those that are to be used to the end of their economic life or are to be closed rather than sold.

  
  

  Noncurrent assets that are temporarily taken out of use are not treated as if they have been abandoned.
• Measurement of held for sale assets and disposal groups

  Initially and subsequently measured at the lower of carrying amount and fair value less costs to sell
• Fair value


  The "price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date" (PFRS 13.Appdx. A)
• Costs to sell


  The "incremental costs directly attributable to the disposal of an asset or disposal group, excluding finance costs and income tax expense" (PFRS 5.Appendix)
• Costs to sell are discounted to their present value if the sales is expected to occur beyond one year.
• Assets classified as held for distribution to owners are measured at the lower of carrying amount and fair value less costs to distribute.
• Held for sale assets that are acquired as part of a business combination are measured at fair value less costs to sell, not at fair value as required by PFRS 3.
• Changes in fair value less costs to sell

  Subsequent changes in fair value less costs to sell are recognized in profit or loss as impairment losses or gains on reversal of impairment.

  However, a gain on reversal of impairment is recognized only to the extent of cumulative impairment losses that have been previously recognized.
• Depreciation and amortization

  HFS assets are not depreciated or amortized while they are classified as HFS. However, interest and other related expenses attributable to financial instruments included in a DG are continued to be recognized.
• Disposal group (DG)

  On subsequent remeasurement of a DG, the CA of any assets and liabilities that are not within the scope of the measurement requirements of PFRS 5 but are included in a DG classified as HFS with applicable PFRSs before the fair value less costs to sell of the DG is remeasured.
• Impairment loss for a DG reduces the CA of the NCA in the group that are within the scope of the measurement requirement of PFRS 5, in the following order of classification:

  1. any goodwill allocated to the group; and
  2. other assets of the group pro rata on the basis of the CA for each asset in the unit (group of units)

  • reductions in the CA are treated as impairment losses on individual assets.
  • reversal of impairment loss is allocated to the assets of the group, except for goodwill, pro rata on the basis of the CA of those assets.
• Changes to a plan of sale

  An asset that ceases to be classified as held for sale is measured at the lower of the asset's carrying amount before it was classified as held for sale, adjusted for any depreciation, amortization or revaluation that would have been recognized had the asset not been classified as held for sale; and recoverable amount at the date of subsequent decision not to sell
• Recoverable amount


  The higher of an asset's fair value less costs of disposal and its value in use
• Value in use


  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
• Removal of an individual asset or liability from a disposal group

  If an entity removes an individual asset or liability from a DG, the remaining assets and liabilities of the disposal group will continue to be measured as a group inly if the group continues to meet the classification as a DG. if not, the remaining NCA of the group that individually meet the criteria to be classified as HFS are classified as HFS. The other assets and liabilities cease to be classified as held for sale.
• Discontinued operations


  A component of an entity that either has been disposed of or is classified as held for sale, and represents a major line of business or geographical area of operations, or is part of a single coordinated 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 resale
• 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
• Cash-generating unit (CGU)


  The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets
• Discontinued operations occur

  When a company eliminates (or will eliminate) the results of operations and cash flows of a component of an entity from its ongoing operations, and there is no significant continuing involvement in that component after its disposal
• Presentation of discontinued operations

  The results of discontinued operations are presented in the statement of profit or loss and other comprehensive income as a single amount comprising the post-tax profit or loss of discontinued operations and the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets constituting the discontinued operation
• Classificationsand Presentation

  • Non-current asset held for sale - a single NCA - Statement of Financial Position
  • Disposal group held for sale - a group of assets - Statement of Financial Position
  • Discontinued operation - a component of an entity - Statement of Financial Position and Statemen of P/L and OCI
• A non-current asset or disposal group held for sale that is not a component of an entity is presented as continuing operation
• Gains or losses on disposal of discontinued operations

  If the actual disposal occurs in the same period the component is classified as held for sale, the gain or loss is the actual gain or loss. If the actual disposal occurs in a subsequent period, an estimated loss on disposal is recognized in the period the component is classified as discontinued operation. Any gain on sale is not recognized until the component is actually disposed of.
• Direct costs associated with the decision to dispose a component

  Costs or adjustments directly associated with the decision to dispose a component should be recognized and shown as part of discontinued operations, such as severance pay, additional pension costs, employee relocation expenses, and future rentals on long-term leases
• Future operating losses from normal operations should not be recognized. Only losses and expenses that result from present obligations are recognized.
• Retrospective application

  If a component of an entity qualified as discontinued operation during the year, all of its results of operations, before and after the classification date, are classified as discontinued operations. The financial statements in the prior period are restated so that the information presented relate to all operations that have been discontinued as of the reporting period for the latest period presented.
• Presentation in the SFP

  Held for sale assets are presented in the statement of financial position as current assets.

  
  

  The assets and liabilities of a disposal group are presented separately in the statement of financial position. Offsetting is prohibited.
• Cessation of classification as discontinued operation

  If a component of an entity ceases to be classified as a discontinued operation in the current year, the previous financial statements are restated. Previous disclosures for discontinued operations are reclassified and included in continuing operations.