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AASB 5 - Non–current Assets Held for Sale and Discontinued Operations
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Summary 
Developments, Key Differences & History 
Compared to IFRS 
Interpretations 
Rejection Notices 
Questions & Answers 
Articles 
AASB website 

 
IFRIC Rejections and Guidance
  1. March 2010 - Reversal of disposal group impairment losses relating to goodwill 
  2. November 2009 - Write-down of a disposal group 
  3. July 2009 - Write-down of a disposal group 
  4. July 2007 - Disclosures  
  5. July 2007 - Plan to sell the controlling interest in a subsidiary 
 
5. March 2010 - Reversal of disposal group impairment losses relating to goodwill 
 
Issue 
 
The IFRIC received a request for guidance on whether an impairment loss for a disposal group classified as held for sale can be reversed if it relates to the reversal of an impairment loss recognised for goodwill.  
 
The IFRIC noted a potential conflict between the guidance in paragraph 22 and paragraph 23 of IFRS 5 relating to the recognition and allocation of the reversal of an impairment loss for a disposal group when it relates to goodwill. However, the IFRIC also observed that the issue may not be resolved efficiently within the confines of existing IFRSs and the Framework and that it is not probable that the IFRIC will be able to reach a consensus on a timely basis.  
 
The IFRIC also noted the decision taken by the Board in December 2009 not to add a project to its agenda to address IFRS 5 impairment measurement and reversal issues at this time.  
 
IFRIC Tentative Decision 
 
Consequently, the IFRIC [decided] not to add this issue to its agenda and recommended that the Board address this issue in a post-implementation review of IFRS 5.  
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4. November 2009 - Write-down of a disposal group 
 
Issue 
 
The IFRIC received a request for guidance on how a disposal group should be recognised at the lower of its carrying amount and fair value less costs to sell when the difference between the carrying amount and fair value less costs to sell exceeds the carrying amount of non-current assets. 
 
IFRIC Decision 
 
The IFRIC noted paragraph 23 of IFRS 5 requires the impairment loss recognised for a disposal group to be allocated to reduce the carrying amount of the non-current assets of the group that are within the measurement requirements of IFRS 5. This can result in a conflict between IFRS 5's requirement to recognise the disposal group at fair value less costs to sell and its limitation on the assets to which that loss can be allocated. Consequently, the IFRIC noted that divergence could arise in practice. 
 
The IFRIC also noted that the issue could be widespread in the current economic environment. The IFRIC concluded that the issue relates to the basic requirements of IFRS 5 and therefore could not be addressed by an interpretation. For this reason, the IFRIC decided not to add the issue to its agenda. However, the IFRIC recommended that the Board considers an amendment to IFRS 5 to address this issue. 
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3. July 2009 - Write-down of a disposal group 
 
Issue 
 
The IFRIC received a request for guidance on the write-down of a disposal group to the lower of its fair value less costs to sell and its carrying amount when the write-down exceeds the carrying amount of non-current assets.  
The IFRIC noted paragraph 22 of IFRS 5 requires the impairment loss recognised for a disposal group to be allocated to reduce the carrying amount of the non-current assets of the group that are within the measurement requirements of IFRS 5. This can result in a conflict between IFRS 5’s requirement to recognise the disposal group at fair value less costs to sell and its limitation on the assets to which that loss can be allocated. Consequently, the IFRIC noted that divergence could arise in practice. The IFRIC also noted that the issue could be widespread in the current economic environment. 
 
IFRIC Tentative Decision 
 
The IFRIC concluded that the issue relates to the basic requirements of IFRS 5 and therefore could not be addressed by an interpretation. For this reason, the IFRIC [decided] not to add the issue to its agenda. However, the IFRIC recommended that the Board amend IFRS 5 as a matter of priority to address the issue. 
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2. July 2007 - Disclosures 
 
Issue: 
 
The IFRIC received a request to clarify whether the disclosure requirements of other standards, in the absence of specific exclusion, would apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations in accordance with IFRS 5. At the May 2007 IFRIC meeting, the staff presented a paper with two alternative views:
  • View A: IFRS 5 and other standards that specifically relate to non-current assets (or disposal groups) classified as held for sale or discontinued operations set out all the disclosures required in respect of those assets or operations. Disclosures required by other standards do not apply to such assets (or disposal groups);  
  • View B: disclosures required by IFRSs, whose scope does not exclude non-current assets (or disposal groups) classified as held for sale or discontinued operations, continue to apply to such assets (or disposal groups).
IFRIC Decision: 
 
The IFRIC believed that this issue could be resolved efficiently through an amendment to clarify IFRS 5 and decided to draw the issue to the attention of the Board rather than taking the item on to its own agenda. The IFRIC also believed that such an amendment should generally reflect view A, but believed that additional disclosures about such assets (or disposal groups) may be necessary to comply with the general requirements of IAS 1 Presentation of Financial Statements.  
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1. July 2007 - Plan to sell the controlling interest in a subsidiary 
 
Issue: 
 
The IFRIC was asked to provide guidance on applying IFRS 5 when an entity is committed to a plan to sell the controlling interest in a subsidiary. The request considered situations in which the entity retained a non-controlling interest in its former subsidiary, taking the form of either an investment in an associate, an investment in a joint venture or a financial asset. The submitter raised four issues relating to the consolidated financial statements of the entity:
  • What triggers classification of the subsidiary’s assets and liabilities as held for sale under IFRS 5?
  • When classification as held for sale is required, should all the subsidiary’s assets and liabilities be classified as held for sale or only the portion to be sold?
  • Is classification as a discontinued operation relevant when the entity plans to retain significant influence over its former subsidiary after the sale?
  • After the sale, how should the remaining non-controlling equity investment be measured?
IFRIC Decision: 
 
In considering the first two issues, the IFRIC noted that paragraph 6 of IFRS 5 states: ‘An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use’ [emphasis added]. The IFRIC decided to recommend to the Board that it amend IFRS 5 to clarify whether the criteria for classification as held for sale are met for all of a subsidiary’s assets and liabilities when the parent is committed to a plan that involves loss of control over the subsidiary. The IFRIC believed that IFRS 5 should be amended to clarify that having a plan that meets the conditions in IFRS 5 involving loss of control over a subsidiary should trigger classification as held for sale of all the subsidiary’s assets and liabilities.  
 
On the third issue, the IFRIC noted that a disposal group classified as held for sale will also be a discontinued operation if the criteria of paragraph 32 of IFRS 5 are met. Because the IFRIC did not expect divergence to emerge in practice, it decided not to address the issue. The IFRIC also noted that IFRS/US GAAP differences are likely to arise until a common definition of discontinued operations is adopted with a consistent approach to continuing involvement (as discussed in BC70 of IFRS 5).  
 
The IFRIC noted that the last issue is being considered in the Board’s joint project on business combinations and, therefore, decided not to address that issue.  
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