HKFRS 5 - Non-current Assets Held for Sale (Condensed)

Objective & Scope

Objective (Paragraph 1)

HKFRS 5 specifies the accounting for assets held for sale and the presentation and disclosure of discontinued operations. Key requirements:

• Measurement: Lower of carrying amount and fair value less costs to sell
• Depreciation: Ceases on such assets
• Presentation: Separate in statement of financial position
• Discontinued operations: Separate in statement of comprehensive income

Scope (Paragraphs 2-5)

Held for Distribution to Owners (Paragraphs 5A-5B)

Classification, presentation and measurement requirements extend to assets held for distribution to owners. Measured at lower of carrying amount and fair value less costs to distribute.

Classification Criteria

Held for Sale (Paragraphs 6-12)

Two Conditions (Paragraph 7):

1. Available for immediate sale in present condition
2. Sale must be highly probable

Highly Probable Criteria (Paragraph 8):

• Management committed to a plan to sell
• Active programme to locate buyer initiated
• Actively marketed at reasonable price
• Expected completed sale within one year
• Unlikely significant changes to plan
• Shareholders' approval considered if required

Held for Distribution to Owners (Paragraph 12A)

Similar criteria: committed to distribute, available for immediate distribution, highly probable, initiated actions, completed within one year.

Assets to be Abandoned (Paragraphs 13-14)

Measurement

Initial Measurement (Paragraphs 15-18)

Held for Distribution: Lower of carrying amount and fair value less costs to distribute.

Newly Acquired: Lower of carrying amount (had it not been classified) and fair value less costs to sell.

Sale Beyond One Year: Measure costs to sell at present value; increase in present value recognised as financing cost.

Subsequent Measurement (Paragraph 19)

1. Remeasure assets/liabilities not within HKFRS 5 measurement scope per applicable HKFRSs
2. Then remeasure fair value less costs to sell of disposal group

Impairment Losses and Reversals (Paragraphs 20-25)

• Recognise impairment loss for write-down to fair value less costs to sell
• Gain limited to cumulative impairment loss previously recognised
• Allocate impairment loss to non-current assets in disposal group per HKAS 36 order
• Gain or loss at derecognition recognised per HKAS 16 or HKAS 38

Changes to Plan of Sale or Distribution

Ceasing to Meet Criteria (Paragraphs 26-29)

Direct Reclassification (Paragraph 26A): If reclassifying directly from held for sale to held for distribution (or vice versa), treat as continuation of original plan. Do not follow paragraphs 27-29; apply new method's classification, presentation, and measurement requirements.

Measurement on Ceasing Classification (Paragraph 27): Measure at lower of:

• (a) Carrying amount before classification, adjusted for depreciation/amortisation/revaluations that would have been recognised
• (b) Recoverable amount at date of decision not to sell

Removal of Individual Asset/Liability (Paragraph 29)

If removing an individual asset/liability from a disposal group:

• Remaining assets/liabilities continue as a group only if still meet criteria
• Otherwise, non-current assets that individually meet criteria measured individually at lower of carrying amount and fair value less costs to sell
• Non-current assets not meeting criteria cease classification

Presentation and Disclosure

Discontinued Operations (Paragraphs 31-36A)

Definition: A component that has been disposed of or is classified as held for sale, and:

• Represents a separate major line of business or geographical area
• Is part of a single co-ordinated plan to dispose of such
• Is a subsidiary acquired exclusively with a view to resale

Statement of Financial Position Presentation (Paragraphs 38-40)

• Non-current assets held for sale presented separately
• Assets and liabilities of disposal group presented separately
• No offsetting
• Major classes disclosed separately
• Cumulative OCI presented separately

Additional Disclosures (Paragraphs 41-42)

Disclose description of asset, facts and circumstances, gain/loss recognised, reportable segment. If plan changes, disclose facts and effect on results.

Transitional Provisions and Effective Date

Transitional Provisions (Paragraph 43)

May apply earlier if valuations and other information were obtained when criteria were originally met.

Effective Date (Paragraphs 44-44M)

Defined Terms (Appendix A)

Defined Terms (Appendix A)

Extension of Period to Complete Sale (Appendix B)

Extension of Period to Complete Sale (Appendix B)

Paragraph 9 permits extension beyond one year in the following situations:

Situation B1(a)

At commitment date, entity reasonably expects others (not buyer) to impose conditions extending the period, AND:

• Actions to respond cannot be initiated until after firm purchase commitment obtained
• Firm purchase commitment highly probable within one year

Situation B1(b)

Entity obtains firm purchase commitment, then buyer or others unexpectedly impose conditions extending the period, AND:

• Timely actions taken to respond
• Favourable resolution of delaying factors expected

Situation B1(c)

During initial one-year period, circumstances arise that were previously considered unlikely, and asset not sold by end of period, AND:

• Entity took necessary action to respond during initial period
• Asset actively marketed at reasonable price given change
• Criteria in paragraphs 7 and 8 met