In accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, a non-current asset (disposal group) is classified as “held for sale” if it’s carrying amount will be recovered principally through a sale transaction rather than through continuing use. However, to qualify to be classified as held for sale, a detailed criteria must be met.
Required:
Identify any TWO criteria to be met before an asset can be classified as held for sale. (2 marks)
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In general, the following conditions must be met for an asset (or ‘disposal group’)
to be classified as held for sale:
- Management is committed to a plan to sell the asset. i.e. an active programme to locate a buyer is initiated and the asset is being actively marketed for sale.
- is available for immediate sale.
- the sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions). The selling price is reasonable in relation to its fair value.
- actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn.