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IFRS 5

Non-current Assets Held for Sale and Discontinued Operations


Basic Baseline

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 1

Learning objectives
Understand the criteria for classifying existing assets as held for sale Understand the measurement and presentation requirements for assets classified as held for sale Understand the classification criteria and presentation requirements for discontinued operations

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 2

Agenda

Objectives and scope of IFRS 5 Held for sale Discontinued operations Special issues Key learning points Forthcoming requirements and future developments

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 3

Objectives of IFRS 5
Specifies Measurement; Presentation; and Disclosure requirements for assets held for sale and discontinued operations Part of project to reduce differences with U.S. GAAP: Partially converged with FAS 144 but differences remain Exposure draft Discontinued Operations Proposed amendments to IFRS 5 reduces further differences
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 4

Scope of IFRS 5
Classification and presentation requirements apply to all noncurrent assets and disposal groups (as a whole) Measurement requirements apply to all non-current assets and disposal groups (as a whole) except the following: financial assets within the scope of IAS 39; deferred tax assets (IAS 12); assets related to employee benefits (IAS 19) and insurance contracts (IFRS 4); certain assets whose subsequent measurement is based upon fair value (e.g., investment properties). Excluded assets are measured using the IFRSs that normally apply to such items. This also applies if they are part of a disposal group.
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 5

Agenda

Objectives and scope of IFRS 5 Held for sale Classification Measurement Presentation Discontinued operations Special issues Key learning points Forthcoming requirements and future developments
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 6

Classification as held for sale

Non-current asset

Carrying amount to be recovered principally through sale Detailed criteria

Classify as held for sale

Available for immediate sale


In its current condition

Sale is highly probable


Management committed to a plan to sell Actively marketing at a reasonable price Significant changes to plan unlikely Sale expected in one year from the date of classification as held for sale (may be extended in certain circumstances)
IFRS 5 - 7

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Disposal group
Group of assets
(must include at least one non-current asset within the scope of IFRS 5)

Dispose in a single transactio n

+
Directly associated liabilities

=
Held for sale?

Disposal group

Yes, if carrying amount to be recovered principally through sale (same criteria as for individual assets)

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 8

Extension of period to complete sale beyond one year


Does not preclude an asset (or disposal group) from being classified as held for sale if: Delay is caused by events and circumstances beyond the entitys control; and Sufficient evidence exists that entity remains committed to its plan to sell

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 9

Available for immediate sale - examples


Example 1 new building A need to vacate the current property is usual and customary and does not mean that the property fails the availability criterion The need to construct a new building to move into prior to vacating means that the existing property fails the availability criterion until the construction is completed Example 2 operations If the entity intends to transfer operations with the disposal group, the existence of uncompleted orders does not affect the availability criterion If operations are not to be transferred and the entity intends to complete existing orders and transfer only after the orders are complete and operations cease, the criterion is failed until the operations actually cease
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 10

Case studies 1 and 2

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 11

Measurement on initial classification


Immediately before classification as held for sale measure in accordance with the relevant IFRSs Measurement on classification (assets (disposal group) in measurement scope only) lower of carrying amount and fair value less costs to sell Losses on a disposal group allocated to the non-current assets within the measurement scope of IFRS 5 in the order of IAS 36 allocation included in profit or loss whether or not the asset was (or the disposal group includes assets that were) previously measured at revalued amounts A disposal group continues to be consolidated while held for sale Assets held for sale are not depreciated or amortised

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 12

Subsequent remeasurement
Assets (disposal groups) in measurement scope of IFRS 5 subsequently remeasured at their fair value less costs to sell recognition of gains is restricted to impairment losses previously recognised under IFRS 5 and IAS 36 Assets and liabilities excluded from measurement scope of IFRS 5 on subsequent remeasurement measured in accordance with the relevant individual IFRSs Gains / losses on a disposal group allocated to the non-current assets within the measurement scope of IFRS 5 in the order of IAS 36 allocation included in profit or loss whether or not the asset was (or the disposal group includes assets that were) previously measured at revalued amounts On disposal any gain or loss not recognised prior to the date of sale is recognised on the derecognition of the assets (disposal group)
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 13

Presentation of non-current assets (disposal groups) held for sale


On the face of the statement of financial position
Non-current assets and assets of disposal group shown separately as Held for sale Liabilities of disposal group shown separately as Held for sale Presentation as current if sale is within 12 months Comparatives are NOT re-presented Assets and liabilities are NOT offset

Major classes of assets and liabilities disclosed separately either in the statement of financial position or notes
exceptions for certain newly acquired subsidiaries

Gains and losses on remeasurement included in profit or loss from continuing operations
unless the group meets the definition of a discontinued operation
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 14

Agenda

Objectives and scope of IFRS 5 Held for sale Discontinued operations Classification Presentation Special issues Key learning points Forthcoming requirements and future developments
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 15

Classification as a discontinued operation


A discontinued operation is: A component = Operations and cash flows distinguishable operationally and for financial reporting purposes (e.g., a Cash Generating Unit or a group of CGUs) That is: And represents a: Separate major line of business or geographical area Part of a single plan to dispose of a separate major line of business or geographical area Subsidiary acquired exclusively with a view to resale Disposed of or classified as held for sale

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 16

Presentation of a discontinued operation


Classification criteria must be met before end of the reporting period Statement of comprehensive income Single amount on the face comprising of:
post-tax profit/loss of discontinued operation post-tax gain/loss recognised on the measurement to fair value less cost to sell or on the disposal

Re-present comparatives for prior periods

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 17

Presentation of a discontinued operation (continued)


On the face or in the notes separately from continuing: revenue expenses pre-tax profit or loss and related income tax expense gain or loss recognised on:
remeasurement to fair value less costs to sell; or disposal of the assets or disposal group(s)

related income tax expense net cash flow attributable to operating, investing and financing activities income from continuing and discontinued operations attributable to owners of the parent
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 18

Presentation of a discontinued operation (continued)


If components of profit or loss are presented in a separate statement of comprehensive income, present a separate section related to discontinued operations If discontinued operation ceases to meet the classification criteria reclassify to continuing Disclosure exception apply to subsidiaries acquired with a view to resale
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 19

Case study 3

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 20

Agenda

Objectives and scope of IFRS 5 Held for sale Discontinued operations Special issues Key learning points Forthcoming requirements and future developments

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 21

Subsidiaries acquired exclusively to resale


Classification as held for sale if sale is expected within one year other classification criteria are met or highly probable to be met within a short period (usually within three months) Measurement on initial recognition at the lower of: carrying amount had the asset (or disposal group) not been classified as held for sale; and fair value less costs to sell Investments in subsidiaries consolidated certain exemption regarding presentation and disclosures Investments in associates and jointly controlled entities NOT equity accounted or proportionally consolidated
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 22

Reclassification as held for use


A non-current asset that ceases to be classified as held for sale is measured at the lower of
carrying amount had the asset not been classified as held for sale and its recoverable amount at the date criteria are no longer met

Adjustment is recognised in profit or loss unless the asset was measured at a revalued amount Disclosures
Description of facts and circumstances leading to the decision Effect on the results for the period and any prior period presented
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 23

Agenda

Objectives and scope of IFRS 5 Held for sale Discontinued operations Special issues Key learning points Forthcoming requirements and future developments

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 24

Recap Quiz
True or False?
A. A parent company has owned a subsidiary for a number of years, but now its board of directors votes to sell the subsidiary. The subsidiary will be excluded from consolidation because control is expected to be temporary. B. A company has decided to discontinue the operations of its subsidiary X. In accordance with IFRS the results of the operations should be disclosed as extraordinary in the financial statements. C. Measurement provisions of IFRS 5 apply to all noncurrent assets. D. Under IFRS 5 comparatives are restated when assets are classified as held for sale in the current period.
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 25

Recap Quiz Solution


A. False B. False C. False D. False

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 26

Key learning points


Classification as held for sale when carrying amount will be recovered through a sale asset is available for immediate sale sale is highly probable Non-current assets (and disposal groups) held for sale measured at the lower of carrying amount and fair value less costs to sell are not amortised or depreciated presented separately from other assets / liabilities Discontinued operations limited to operations that are a separate major line of business or geographical area and controlled entities acquired exclusively with a view to resale presented separately in the statement of comprehensive income
2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 27

Key learning points (continued)

Impact of classification as: Held for sale: Current assets Non-current assets in scope Non-current assets not in scope Disposal group as a whole Discontinued operation

Measurement

Presentation Current period Comparatives re-presented?

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 28

Agenda

Objectives and scope of IFRS 5 Held for sale Discontinued operations Special issues Key learning points Forthcoming requirements and future developments

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 29

Forthcoming requirements and future developments

An entity which is committed to a sale plan involving loss of control of a subsidiary has to classify the all assets and liabilities of the subsidiary as held for sale Exposure draft 2008/47 to amend IFRS 5 New definition of discontinued operations based on segments Additional disclosures proposed

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 30

Forthcoming requirements and future developments (continued)

IFRIC 17 Distributions of Non-cash Assets to Owners Amendments to IFRS 5 Scope expanded to include non-current assets (disposal groups) held for distribution to owners acting in their capacity as owners Classify as held for distribution when entity is committed to the distribution

2009 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

IFRS 5 - 31