Non-current Assets Held For

Sale and Discontinued

Operations
Challenges in applying IFRS 5

May 2008
Challenges in applying IFRS 5 1

© 2008 Grant Thornton International Ltd All rights reserved.

Introduction
Discontinuing a business operation or deciding to sell a major asset is important commercial events.

These decisions are also likely to have a significant effect on an entity's results and net assets. The impact

of these events and the way in which they are reported is therefore of much interest to investors, analysts,

regulators and other financial statement users. This is also the subject of a specific International Financial

Reporting Standard: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (IFRS 5).

IFRS 5 can have a significant effect on a company's profit or loss, the carrying values of its assets and on

the presentation of results. The financial statement impacts may extend to prior and future accounting

periods. IFRS 5 is not a new standard but experience has shown that implementation can be a complex

and time-consuming exercise. Significant judgment is required in some areas.

Management and auditors should therefore assess the impact of IFRS 5 as soon as they become aware that

it may be relevant.

The guide is organised as follows:

Section A addresses when assets (and related liabilities) are classified as held for sale;

Section B sets out the circumstances in which a planned or completed disposal gives rise to a

discontinued operation;

Section C covers the measurement consequences of held for sale classification;

Section D provides guidance on the application of IFRS 5's requirements on presenting discontinued

operations and assets held for sale and related disclosures; and

Section E provides specific guidance on many of the common practical and interpretive issues

encountered in applying IFRS 5.

References to IAS 1 Presentation of Financial Statements (revised 2007)

All references in this guide to IAS 1 are based on the 2007 version of this standard. The revised version of

IAS 1 introduced, amongst other amendments, various changes in the financial statement terminology.

For example, IAS 1 uses the term statement of financial position instead of balance sheet and statement of

cash flows instead of cash flow statements . This guide reflects these recent changes to the IFRS

terminology.

Contents
Page

Introduction 1

A. Assets held for sale and disposal groups 5

1. Definitions 5

2. Initial classification requirements 6

2.1 Available for immediate sale 6

2.2 Highly probable sales transaction 7

3. Allocating assets and liabilities to a disposal group 9

4. Subsequent review of the held for sale classification 12

4.1 Conditions are imposed as expected on the transfer of assets 12

4.2 Conditions are unexpectedly imposed on the transfer of assets 12

4.3 Buyer not found during initial one-year period 13

B. Discontinued operations 14

1. Definitions 14

2. Classifying business activities as discontinued operations 15

2.1 Significance of the ceased activities 15

2.2 Manner and timing of disposal 15

2.3 Discontinued operations and the asset(s) held for sale classification 15

C. Measurement requirements of IFRS 5 17

1. Measurement scope of IFRS 5 17

2. Measurement of asset(s) held for sale 18

2.1 Fair value less costs to sell 18

2.2 Recognition of impairment losses 19

2.3 Reversals of previous impairment losses 20

3. Measurement implications of a change in or withdrawal from the selling plan 21

D. Presenting discontinued operations and assets held for sale, and related disclosure requirements 24

1. Assets held for sale and disposal groups: Presentation and disclosures 24

1.1 Presentation in the statement of financial position 24

1.2 Disclosures 25

2. Discontinued operations: presentation and disclosures 26

2.1 Presentation in the statement of comprehensive income 26

2.2 Comparatives 26

2.3 Disclosures 27

2.4 Cash flows resulting from discontinued operations 27

3. Changes in a plan to sell 28

4. Post-disposal results from discontinued operations 28

5. Example presentation layouts and selected explanatory notes thereto 28

5.1 Assets held for sale and disposal groups 28

5.2 Discontinued operations 31

E. Practical implementation issues 35

1. Assets acquired exclusively with a view to resale 35

1.1 Held for sale classification 35

1.2 Consolidation of a subsidiary acquired exclusively with a view to resale 35

1.3 Initial measurement 36

1.4 Financing costs and income taxes 36

1.5 Presenting discontinued operations 36

1.6 Disclosures 36

2. Part-disposal of a subsidiary 37

3. Separate financial statements 37

4. Measurement of liabilities associated with a disposal group 37

5. Intragroup transactions and balances 38

6. Related disclosure requirements in other IFRSs 38

6.1 Assets held for sale 38

6.2 Discontinued operations 39

A. Assets held for sale and disposal groups

IFRS 5 sets out specific measurement requirements for non-current assets and disposal groups that are

classified as held for sale. Held for sale classification is not an accounting policy choice; it is mandatory

when certain conditions apply, namely if the asset(s) in question is (are) available for immediate sale and

the sale is highly probable. Very often, a planned sale involves a group of assets (and possibly liabilities).

IFRS 5 introduces the concept of a disposal group to address this situation.

This section discusses the requirements to meet the held for sale classification. The measurement

requirements that apply when this classification takes effect are discussed in Section C.

1. Definitions

IFRS 5.6 states that:

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.

Typically, this definition captures individual assets that the entity seeks to dispose of in a sale transaction,

such as: Property, plant and equipment; Intangible assets; Investment property, Biological assets; and

Non-current financial investments, such as interests in associates, or other financial instruments.

Assets that are to be abandoned or scrapped (rather than sold) are not classified as assets held for sale

(IFRS 5.13-14). Assets that will be derecognized due to an exchange of non-current assets with a third

party are covered by IFRS 5 unless the exchange lacks commercial substance. Sale and leaseback

transactions are outside the scope of IFRS 5 and are covered by IAS 17 Leases. Sales of machinery,

vehicles and other equipment, which have been replaced by new items and sales of surplus property are
very common examples of transactions where IFRS 5 applies even where the disposed assets do not form

a disposal group.

A disposal group is defined as:

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. The group includes goodwill acquired

in a business combination if the group is a cash-generating unit to which goodwill has been allocated in accordance

with the requirements of paragraphs 80 87 of IAS 36 Impairment of Assets (as revised in 2004) or if it is an operation

within such a cash-generating unit (IFRS 5.A).

Examples of a disposal group include a subsidiary or an operating segment or a cash generating unit

(CGU). A disposal group is sometimes but not always a discontinued operation (see page 15).

2. Initial classification requirements

IFRS 5 specifies two main requirements to initially classify asset(s) as held for sale. Firstly, the asset(s)

must be available for immediate sale in its (their) present condition. Secondly, the sale must be highly

probable.

2.1 Available for immediate sale

The term available for immediate sale requires some interpretation. An asset is available for immediate

sale if there is no significant reason why the sale could not take place immediately.

Terms that are usual and customary for similar sales and are not likely to cause a material delay do not

preclude held for sale classification.

The Implementation Guidance to IFRS 5 sets out a number of examples to illustrate these concepts.

Assets are not available for immediate sale if they continue to be needed for the entity's ongoing

operations (IFRS 5.IG examples 1b and 2b) or are being refurbished to enhance their value (IFRS 5.IG

example 3a). Held for sale classification is then delayed until the assets under review are available for

immediate sale.

Examples

1. A property used as headquarters by the entity itself needs to be vacated before it can be sold.
If the property is expected to be vacated in the usual course of the sales plan, then a held for sale

classification may be appropriate in accordance with the standard. If however the property can be vacated

only after a replacement is available (eg a new building under construction or one that still needs to be

vacated by its former tenants/owners), then this may indicate that the property is not available for

immediate sale, but only after the replacement becomes available.

2. An entity intends to sell a manufacturing facility. If the entity needs the facility to clear a backlog of

uncompleted orders, then this may indicate that the facility is not available for immediate sale. If the

entity however seeks to sell the manufacturing facility including the backlog of uncompleted orders, its

availability for immediate sale may be assumed.

3. An entity plans to renovate some of its property to increase its value prior to selling it to a third party.

The entity is already searching for a buyer at current market values. Nevertheless, due to the plans to

renovate the property prior to sale, the property may not be available for immediate sale.

Hints

- An abandonment or unintentional loss of control over assets does not meet the held for sale classification.

- Assets that are sold in a series of transactions rather than in a single transaction need to be considered individually to determine

whether or not they should be classified as held for sale.

Five conditions of a highly probable sales transaction (IFRS 5.8):

1) The appropriate level of management is committed to the selling plan;

2) The asset(s) are being actively marketed;

3) The assets are on the market at a price that is reasonable in relation to their estimated current fair

values;

4) Completion of the sales transaction is expected within one year from the initial date of

classification;

5) Significant changes to or a withdrawal from the selling plan are unlikely.

Consideration of whether these conditions have been met is based on the specific facts and circumstances

and professional judgment is necessary to determine whether a sales transaction is highly probable.

2.2 Highly probable sales transaction

For a sale to be highly probable at the reporting date, the entity must have a plan to sell. There are no

specific requirements regarding the sale s form and judgment is required to determine whether the

conditions in IFRS 5 have been met.

Sometimes a potential buyer may already have been identified and the selling plan is therefore reasonably

apparent at the balance sheet date. Indeed, the trigger for a held for sale classification is often a buyer s

firm purchase commitment a contract that IFRS 5 defines as:

An agreement with an unrelated party, binding on both parties and usually legally enforceable, that (a) specifies all

significant terms, including the price and timing of the transactions, and (b) includes a disincentive for non-

performance that is sufficiently large to make performance highly probable. (IFRS 5.A)

The substance of any arrangement between the selling entity and the probable buyer needs to consider. A

letter of intent or similar pre-contract document may or may not constitute a firm commitment for this

purpose. The enforceability of the arrangement needs to be assessed and may depend in part on the legal

environment in addition to the stated terms. Pre-contract arrangements may or may not specify a penalty

if one of the parties withdraw from the transaction.

In the absence of a firm sales commitment, further analysis of the selling plan is necessary to determine

whether the anticipated transaction is highly probable. IFRS 5 sets out five conditions which need to be

met:

Commitment by appropriate level of management (and related shareholder approval)

The appropriate level of management should be committed to the selling plan (IFRS 5.8).

Management is generally regarded as those persons with authority and responsibility for planning,

directing and controlling the activities of the entity. A sale cannot usually be considered highly probable

if the entity s management is not (yet) committed to a selling plan.

In our view, the entity should also consider whether shareholder approval is required to proceed with a

selling plan. Shareholder approval is, for example, sometimes necessary under applicable laws or

regulations. In some circumstances, shareholder approval might be a perfunctory matter.

However, the sale will not be highly probable if shareholder approval is substantive and there is

reasonable doubt that it will be forthcoming.

Active marketing efforts

For a selling plan to indicate a highly probable sale, an active programme to locate a buyer and complete

the plan must have been initiated (IFRS 5.8). The entity therefore must actively market the asset(s) by

making its intention to sell known to third parties that may be interested in acquiring the asset.

In practice, the engagement of an outside selling agent to attract interest from potential buyers may be

considered as an active marketing effort by the entity. Advertisement of the intention to sell through the

media may also be considered as the beginning of active marketing efforts. However, it is generally not

necessary to announce the intention to sell to the general public or to employees of the entity that are

likely to be affected by the sales transaction.

If an entity initiates a sale programme after the balance sheet date but before the date of authorization of

the financial statements, presenting an asset(s) as held for sale is precluded.

However, it may be necessary to disclose a non-adjusting event after the balance sheet date in accordance

with IAS 10 Events After the Reporting Period.

Marketed at fair value

The asset(s) must also be marketed at a suggested selling price that is reasonable compared to its fair

value (IFRS 5.8). This does not necessarily require that the asking price is announced to potential buyers.

Sometimes an asking price that exceeds fair value is announced, based on an expectation that the actual

price will be reduced to fair value in negotiation. This does not preclude the held for sale classification if

the difference is justifiable based on local market conditions.

Sale or firm purchase commitment highly probable within one-year period

At the date of initial classification of one or more assets as held for sale it should be reasonable to expect

that the selling plan is completed within one year (IFRS 5.8). In our view, a selling plan is completed only

when the assets (and liabilities if applicable) qualify for de-recognition in accordance with applicable

IFRS.
The only exception to this one year timeframe arises in circumstances in which the entity expects an

outside party (not the buyer) to impose conditions on the transfer of assets that will extend the period to

complete the sale (e.g. regulatory approval). Held for sale classification is then appropriate if the entity

can address the imposed conditions only after a firm purchase commitment has been obtained and if a

firm purchase commitment is highly probable within one year (IFRS 5.9 and IFRS 5.B1 (a)).

Other factors to consider in assessing the probability of a sale within one year include the number of

potential buyers, the nature and value of the asset in question (including the extent to which it has

specialized use), market conditions and past experience in selling similar assets.

Sales transaction progressing according to plan

Actions taken to complete the selling plan and events since the held for sale classification was initiated

should indicate whether or not the sale is likely to occur according to plan. If there are indicators that

significant changes to the selling plan will be necessary or if a withdrawal from the selling plan is likely,

the sale should not be considered highly probable and hence, the asset(s) under review should not be

classified as held for sale (IFRS 5.8). Indicators that should be considered include a downturn in the

relevant market sector, increases in interest rates (which affect financing costs of a potential buyer) and

changes in the business strategy of the reporting entity.

This requirement for a held for sale classification needs to be considered independently from the right to sell the assets under

review. If a sale is not possible eg due to physical constraints, immediate availability for sale should not be assumed and

classification of the asset(s) as held for sale is not appropriate.

Deferred tax assets and liabilities

A careful analysis is necessary to assess whether deferred taxes are directly associated with a disposal

group, ie they will be transferred in the anticipated sales transaction:

Temporary differences that directly relate to assets and liabilities inside the disposal group (sometimes

referred to as inside basis differences) give rise to deferred taxes that belong to the disposal group.

In group tax structures, temporary differences may also arise in connection with the interest in the

disposal group, but outside of the level of the investing entity. These outside basis differences should not
be included in the disposal group, as they will trigger tax payments for the continuing part of the reporting

entity.

Consideration of these matters should be based on the specific facts and circumstances and professional

judgment is often required to determine whether deferred taxes are directly associated with a disposal

group or not.

3. Allocating assets and liabilities to a disposal group

If the entity s sales plan addresses a group of assets that will be disposed of in a single transaction, the

entity classifies the group of assets as a whole as held for sale. It also presents any liabilities associated

with those assets as held for sale, if the liabilities will be transferred in the same transaction. Any

goodwill directly allocated to the group of assets to be disposed of is also treated as held for sale. This

includes sales of all or part of a CGU to which goodwill has been allocated.

These assets and the related liabilities are then referred to as a disposal group.

IFRS 5 does not provide further detailed guidance on which assets or liabilities should be included in a

disposal group. The definition above (page 6) suggests that a disposal group includes only those assets

and liabilities that will be disposed of in the single planned sales transaction. In addition to identifying

common types of non-current assets (see page 5) which should be included in the disposal group, the

following points should be considered in order to determine whether other individual assets and liabilities

may be allocated to a disposal group:

The intention to carry out the sale cash and debt free indicates that cash and cash equivalents as well as

some of the group s financial liabilities may not be part of the sales transaction;

Deferred taxes recognized in connection with the assets and liabilities of a disposal group should be

included in the disposal group. The same principle applies to unused tax losses and unused tax credits that

will be transferred to a third party in the course of the anticipated sales transaction (see opposite); and

All liabilities expected to be transferred to a third party in the course of the single sales transaction should

be included in the disposal group. This may include, in particular, non-current liabilities such as

provisions or employee benefits obligations.

Differing interpretations can arise as to how current assets should be allocated to a disposal group.

Two approaches are applied in practice, which both appear acceptable under IFRS 5.

One approach would be to focus on the definition of the disposal group. This definition refers to assets

that will be disposed of, by sale or otherwise, together as a group in a single transaction (IFRS 5.A). This

appears to exclude assets and liabilities that will no longer exist at the expected date of this single

transaction because they have been sold, transferred, realized or settled before that date. Where the

disposal group represents a CGU, subsidiary or similar unit of the entity, an analysis of its current assets

and liabilities is therefore necessary to exclude items not expected to be part of the single sales

transaction. Related deferred tax assets and liabilities also need to be excluded.

Another approach focuses on IFRS 5.4, which states that a disposal group may include any assets and any

liabilities of the entity including current assets . This approach leads to the inclusion of all of the

categories of asset and liability expected to be disposed of in the single transaction. It does not look to the

individual assets and liabilities within those categories. All current assets and liabilities that can be

allocated to the disposal group at the balance sheet date are therefore included in the disposal group

without further analysis.

Example: Allocating assets and liabilities to a disposal group

Entity A currently controls subsidiary B for which it is actively seeking a buyer. The subsidiary is

available for immediate sale and the sale is considered highly probable. In the consolidated accounts of

the A-group, the following assets and liabilities are held and assumed by B:

Assets CU000s Liabilities CU000s

Goodwill
500 Long term borrowings 1,000

Other intangible assets 800 Employee benefit obligations 1,200

Property, plant and equipment 1,200 Other provisions 400
Inventory 300 Deferred taxes 350
Trade receivables 400 Trade payables 300
Cash 200
3,400 3,250

Entity A is currently considering offers for subsidiary B and expects that the sales transaction will be

completed in 5 months. Current discussions focus on a sale of the subsidiary cash and debt free, so its
long-term borrowings and the cash held directly by subsidiary B are not considered to be part of the

disposal group.

An analysis of deferred tax liabilities shows that they are mainly related to temporary differences arising

in conjunction with intangible assets and subsidiary Bs property, plant and equipment. It is therefore

concluded that the deferred tax liabilities should be included in the disposal group.

Entity A expects that all of the inventories, trade receivables and trade payables will be sold or settled

within the next five months. As discussed above, it is therefore an interpretation issue as to whether these

current items are included or excluded from the disposal group. In this case,

Entity A has made an accounting policy choice in a previous transaction to include all assets and

liabilities in a disposal group based in the circumstances at the balance sheet date. Its disposal group

assets and liabilities may therefore be summarized as follows:

Disposal group assets CU000s Disposal group liabilities CU000s

Goodwill 500 Employee benefit obligations 1,200

Other intangible assets 800 Other provisions 400

Property, plant and equipment 1,200 Deferred taxes 350

Inventory 300 Trade payables 300

Trade receivables 400

3,200 2,250

4. Subsequent review of the held for sale classification

Sales transactions may sometimes not proceed as initially planned, for example, where a buyer cannot be

found or regulatory approval is required. A review of the selling plan is generally necessary at subsequent

balance sheet dates to ensure that the held for sale criteria continue to be met.

If the sales transaction is delayed beyond the initial one-year period, it is necessary to consider the

reasons for the delay. IFRS 5 allows an extension of the held for sale classification only if the delay is

caused by events or circumstances beyond the entity s control and there is sufficient evidence that the

entity remains committed to its plan to sell the asset (or disposal group) (IFRS 5.9). The standard

identifies only three scenarios in which a delay is considered to be beyond the entity s control and the
held for sale classification may be continued (provided that the sales transaction is still highly probable

and that the asset(s) is (are) still available for immediate sale).

4.1 Conditions are imposed as expected on the transfer of assets

The selling entity has obtained a firm purchase commitment at the end of the initial one-year period.

As initially expected, a party other than the potential buyer has imposed conditions on the transfer of the

asset(s). This outside party may, for example, be a regulatory body such as a government anti-trust

agency or similar oversight body and actions necessary to respond to these conditions could not be

initiated until a firm purchase commitment from a potential buyer was obtained. As the selling entity is

dealing with the imposed conditions, completion of the sales transaction is expected after more than one

year since the initial held for sale classification.

The held for sale classification is continued in this scenario if actions to respond to conditions imposed on

the transfer of assets have been initiated (IFRS 5.B1 (a)).

4.2 Conditions are unexpectedly imposed on the transfer of assets

The potential buyer or another party has imposed conditions on the transfer of assets that will delay

completion of the selling process. The conditions were not expected at the initial classification date.

The entity, however, has obtained a firm purchase commitment. In this scenario, the asset(s) only

continue to be classified as held for sale if:

The entity has taken timely actions to respond to the conditions (IFRS 5.B1 (b) (i)); and

It is expected that the delaying factors will be resolved to allow completion of the selling plan (IFRS 5.B1

(b) (ii)).

Review within the initial one-year period within the one-year period, the classification is continued if all the initial classification

requirements of IFRS 5.8 are still met. If the assets are no longer available for immediate sale or if a sales transaction is no longer

highly probable, the classification is to be ceased. The entity then needs to reclassify the assets in accordance with applicable

IFRS (IFRS 5.26) and modify the measurement of the asset(s) under review in accordance with IFRS 5.27-29.

4.3 Buyer not found during initial one-year period

Other events that were not considered likely at the date of initial classification resulted in a delay beyond

the one year period. Examples include circumstances in which the relevant market has unexpectedly dried
up or where the asset(s) concerned have rapidly lost their appeal to potential buyers due to technological

obsolescence or similar developments. In this scenario, the selling entity may only continue to classify the

asset(s) concerned as held for sale if the delay is due to developments outside the entity s control. Factors

to consider in these circumstances include:

Whether the entity took the action during the initial one-year period that was necessary to respond to

changes in circumstances that were initially considered unlikely, but that in fact contributed to the delay

(IFRS 5.B1 (c) (i)).Whether the asset(s) were actively marketed at a price reasonable given the changes in

circumstances (IFRS 5.B1 (c) (ii)). In practice, the entity should have contacted either directly or

indirectly through a selling agent potential buyers and conducted reasonable effort to complete the sales

transaction. Whether a sale is still considered highly probable and the asset(s) continue to be available for

immediate sale in their current condition (IFRS 5.B1 (c) (ii)). Where the asset(s) concerned have been

damaged in the meantime or are used again in the entity s continuing operations, this may indicate that

they are not available for immediate sale and the held for sale classification should cease.

IFRS 5 is not entirely clear on whether the initial one year period may be extended only once, or more often. In practice, repeated

delays are in any case likely to cast significant doubt on the completion of the sales transaction according to plan.

Discontinued operations
IFRS 5 also addresses the concept of discontinued operations. This concept is not the same as the held for

sale classification, although the concepts are linked. Discontinued operations give rise to specific

presentation requirements rather than remeasurements. Discontinued operations are presented separately

in an entity s statement of comprehensive income and also require preparers to compute and disclose

additional measures of earnings per share (EPS). Mandatory disclosures are provided to further explain

the underlying event or transaction.

This section explains the conditions that trigger the presentation of a discontinued operation. The

interaction with the held for sale classification is also addressed. The presentation requirements are

illustrated in Section D.
1. Definitions

IFRS 5 applies to a variety of situations in which an entity ceases separately identifiable activities. IFRS 5

defines a discontinued operation as:

A component of an entity that either has been disposed of or is classified as held for sale and:

(a) Represents a separate major line of business or geographical area of operations,

(b) Is part of a single co-ordinate plan to dispose of a separate major line of business or geographical area of

operations or

(c) Is a subsidiary acquired exclusively with a view to resale (IFRS 5.A).

A component of an entity is defined as:

Operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes from

the rest of the entity. (IFRS.5.A)

Judgment is sometimes necessary in deciding whether a disposal represents a discontinued operation.

Depending on the facts and circumstances of each transaction, it may not be appropriate to present every

ceased activity of the reporting entity as a discontinued operation. Rather the entity should focus on

significant elements of its operations.

2.1 Significance of the ceased activities

The standard explains that discontinued operations usually will have been a cash-generating unit or a

group of cash-generating units while being held for use (IFRS 5.31). A CGU is therefore likely to be the

smallest component of an entity whose disposal might give rise to a discontinued operation.

The disposal of a reportable segment is likely to give rise to a discontinued operation. Presenting a

reportable segment in accordance with IFRS 8 Operating Segments indicates its significance and also

confirms that discrete financial information is available. Moreover, the definition of operating segments

under IFRS 8 also relates to a component of an entity (IFRS 8.5), which is similar to the definition of a

discontinued operation under IFRS 5. This also applies to reported segments that no longer meet the

quantitative thresholds but are presented separately because of their continued significance in accordance

with IFRS 8.17.

A subsidiary that was acquired exclusively with a view to resale is considered to be a discontinued

operation by definition. The financial results of an entity that acquires a business and resells parts of it in

the aftermath of the business combination may therefore be presented as a discontinued operation.

In contrast, a group of productive assets such as a factory that was a component of a CGU and has not

been reported as an operating segment would not (if disposed of) be a discontinued operation.

2.2 Manner and timing of disposal

To be considered discontinued, the component in question must be either: classified as held for sale; or

actually disposed of at the end of the reporting period.

2.3 Discontinued operations and held for sale classification

If a group of assets (and liabilities) meets the conditions to be classified as held for sale and also

represents a major operation, as discussed above, both a disposal group and a discontinued operation

arise. However, the linkages between discontinued operations and the held for sale classification are not

always so clear.

For example:

A co-ordinate but piecemeal sale of a group of assets and liabilities might represent a discontinued

operation, but would not give rise to a disposal group; or a plan to abandon an operation (rather than sell

it) would not lead to held for sale classification.

It would trigger presentation as a discontinued operation only on abandonment.

2. Classifying business activities as discontinued operations

IFRS 5 does not clarify the conditions for presenting business activities as discontinued operations further

than in the basic definitions stated above. This leaves some judgment as to whether the operation is

significant or major enough to meet the definition of a discontinued operation.

In practice, discontinued operations are often activities that have been presented to investors in the past as divisions, business units

or with similar organizational terms. The sale or discontinuation of one or more cash generating units (CGUs), as defined in

accordance with IAS 36 Impairment of Assets, may also indicate the need to present discontinued operations.

The following table summarizes the relationship between the two concepts:

Scenario Explanation Discontinued operation Assets held for sale

Entity disposes of a discontinued operation by selling the underlying assets. The sales transaction, however, is incomplete at the

reporting date .Yes Yes

Entity has ceased activities that meet the definition of a discontinued operation without selling any assets. Yes No

Entity ceases activities and has already completed the sale of the underlying assets or disposal group at the balance sheet date

Yes No

Entity will sell or has sold assets that are within the scope of

IFRS 5, but does not discontinue any of its operations No Yes

Challenges in applying IFRS 5 17

C. Measurement requirements of IFRS 5

Immediately before the held for sale classification, the carrying amount of the asset(s) or disposal group is

measured in accordance with applicable IFRS (IFRS 5.18). Plans to dispose of assets may be an indicator

that the asset(s) may be impaired and may accordingly trigger impairment testing procedures. Any

impairments (or reversals of previous impairments) are recognized before the entity classifies the asset(s)

as held for sale.

It is only after the entity meets the held for sale classification criteria that IFRS 5 s rules on measurement

apply. Assets that are held for sale are measured at the lower of their carrying amounts (which are not

depreciated or amortized) and their fair value less costs to sell. A number of exemptions apply however.

This section explains the measurement effects of IFRS 5 at the initial date of the held for sale

classification and thereafter.

1. Measurement scope of IFRS 5

IFRS 5 generally applies to the measurement of all recognized non-current assets and disposal groups

(IFRS 5.2). However, not all assets that are classified as held for sale in a disposal group are within the

measurement scope of IFRS 5:

The measurement provisions of this IFRS do not apply to the following assets, which are covered by the

Standards listed, either as individual assets or as part of a disposal group:

(a) Deferred tax assets (IAS 12 Income Taxes).

(b) Assets arising from employee benefits (IAS 19 Employee Benefits).

(c) Financial assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement.

(d) Non-current assets that are accounted for in accordance with the fair value model in IAS 40 Investment Property.

(e) Non-current assets that are measured at fair value less estimated point-of-sale costs in accordance with IAS 41

Agriculture.

(f) Contractual rights under insurance contracts as defined in IFRS 4 Insurance Contracts (IFRS 5.5).

The types of assets mentioned above are measured in accordance with applicable IFRSs and the entity's

normal accounting policies even if they are classified as held for sale. An intention to sell such an asset

individually would therefore never trigger a remeasurement in accordance with IFRS 5.

Another rule in IFRS 5.4 scopes in a number of assets in situations in which an entity has identified and

classified a disposal group as held for sale:

( ) If a non-current asset within the scope of the measurement requirements of this IFRS is part of a disposal group,

the measurement requirements of this IFRS apply to the group as a whole, so that the group is measured at the lower

of its carrying amount and fair value less costs to sell. ( )

Challenges in applying IFRS 5 18

Hence, if an entity classifies a CGU, a group of CGUs or similar group of assets as held for sale, the

entity measures the disposal group as a whole in accordance with IFRS 5. Any type of asset that is then

not specifically excluded from the scope of this standard by IFRS 5.5 is not measured individually, but as

part of the disposal group. This may for example include inventories that are part of a disposal group and

other current assets (see page 9 for a discussion of the composition of a disposal group).

2. Measurement of asset(s) held for sale

Once classified as held for sale, and provided that the assets under review are within the measurement

scope of IFRS 5, the assets are measured at the lower of their carrying amount and fair value less costs to

sell (IFRS 5.15). This "IFRS 5 remeasurement" is carried out on the initial held for sale classification and

at subsequent reporting dates. Held for sale assets that are within the measurement scope of IFRS 5 are

not subsequently amortized or depreciated (IFRS 5.25) unless the entity withdraws from its plan to sell

(see page 21).

2.1 Fair value less costs to sell

IFRS 5 s guidance on how the entity should determine fair value less cost to sell is limited.

Appendix A of the standard defines fair value as:

The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an

arm s length transaction.

Costs to sell is defined as:

The incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs

and income tax expense.

Costs to sell need to be discounted if a sale is expected to occur beyond one year. The unwinding of the

discount over subsequent reporting periods is then recognized as a finance cost in profit or loss (IFRS

5.17). In practice, discounting selling costs is usually not necessary. A held for sale classification

generally requires a completed disposal within a one year period. Discounting may therefore only occur

in situations in which the sales transaction is delayed beyond one year in accordance with IFRS 5.9.

In practice, fair value less costs to sell is normally determined in accordance with the measurement

guidance given in IAS 36, which also refers to fair value less costs to sell . In the absence of relevant

market quotes, valuation techniques based on discounted cash flows are therefore normally used to

estimate the fair value of the asset(s) under review. IAS 36 and IFRS 5 may however result in different

relevant values. IAS 36 generally requires measurement at the lower of the carrying amount and the

recoverable amount. The recoverable amount is the higher of value in use and fair value less cost to sell.
IFRS 5, on the other hand, requires measurement at the lower of the carrying amount and fair value less

cost to sell and value in use is not considered as the entity intends to sell rather than use the asset(s).

At the initial classification of assets or disposal groups as held for sale, the entity records the book value of the asset(s) under

review as well as any impairment losses that have previously reduced their carrying amount(s). This information is an important

input for calculating the amount of any future reversals of previous impairment losses.

Challenges in applying IFRS 5 19

2.2 Recognition of impairment losses

An impairment loss is recorded if the assets or disposal group s fair value less cost to sell is lower than its

carrying amount. The actual impairment loss is determined after the subsequent remeasurement of assets

outside the measurement scope of IFRS 5 (IFRS 5.20). In other words, the entity determines the carrying

amount of held for sale assets that are outside the measurement scope of IFRS 5 (if any); Adds these

remeasured amounts to the current carrying amounts of assets that are within the measurement scope of

IFRS 5; and Compares the total carrying amount of the held for sale assets with their fair value less costs

to sell.

A write-down of a group of held for sale assets generally follows the impairment loss allocation rules of

IAS 36 (IFRS 5.23). Any impairment loss under IFRS 5 is therefore allocated initially to disposal group s

goodwill (if any). If the write down exceeds the amount recognised as goodwill, the remaining loss is

allocated on a pro-rata basis to the disposal group s non-current assets. This order of allocation is also

explained in example 10 of IFRS 5.IG.

IFRS 5 does not specify how a write down to fair value less costs to sell is recognised if it exceeds the

carrying amount of goodwill and other non-current assets within the measurement scope of the standard.

In our view any remaining impairment loss should be allocated on a pro-rata basis to any other current

assets that are not specifically excluded from the measurement scope of the standard.

This may for example result in the additional write-down of inventories that are part of the disposal

group.

Example: Applying the measurement requirements of IAS 36 and IFRS 5

Entity A disposes of its subsidiary B. Held for sale classification is met shortly before the balance sheet

date. However, the disposal group that constitutes B also includes goodwill and other assets that are in the

scope of IAS 36. Entity A therefore firstly carries out regular impairment testing procedures in

accordance with IAS 36 and then measures the disposal group at the lower of its carrying amount or fair

value less cost to sell.

Measurement procedure Carrying amount Gain / (loss) Subsequent measurement - in accordance with individual IFRSs

CU 9,000 -

Impairment testing (IAS 36) - lower of carrying amount and recoverable amount Recoverable amount (value in use) is determined

at CU 7,500. CU 7,500 CU (1,500)

Held for sale measurement (IFRS 5) – Lower of carrying amount and fair value less costs to sell Fair value less cost to sell is

determined at CU 2,500. CU 2,500 CU (5,000)

In the above example, if subsidiary B is also considered to be a discontinued operation, any loss as a

result of impairment testing in accordance with IAS 36 would be presented as a loss from continuing

operations, whereas the IFRS 5 loss may be presented within the net result from discontinued operations.

Challenges in applying IFRS 5 20

Example: Measurement of disposal group under IFRS 5

The fair value less costs to sell of assets included in a disposal group has been determined at CU 2,500.

Prior to the held for sale classification, but after regular impairment testing procedures, the carrying

amount of the assets was determined at CU 7,500. The following table illustrates the situation prior to and

after recognition of the IFRS 5 impairment loss:

Prior to IFRS 5 write-down After IFRS 5 write-down

Assets CUs CUs

Goodwill 1,500 0

Other intangible assets 1,000 0

Property, plant and equipment 2,000 0

Inventory 1,500 1,000

Trade receivables 1,500 1,500

7,500 2,500

A write-down of CU 5,000 needs to be allocated to the assets of the disposal group. The impairment loss

is firstly allocated to goodwill and allocated on a pro-rata basis to the other intangible assets and property,
plant and equipment which represent the disposal group s noncurrent assets. This reflects a write down of

CU 4,500. The remainder of the impairment loss is allocated to inventories, as trade receivables are

specifically excluded from the measurement scope of IFRS 5.

An entity should not record additional losses to the effect that the assets fair value less selling costs is

negative. Any additional loss is recognized at the date of derecognition of the asset(s) (IFRS 5.24) on the

basis of the actual selling proceeds. A binding contract, which indicates a negative value of the asset or

disposal group, may give rise to a financial liability or an onerous contract. Such a liability needs to be

recognized separately outside of the disposal group in accordance with other IFRS, eg IAS 37 Provisions,

Contingent Liabilities and Contingent Assets.

2.3 Reversals of previous impairment losses

Fair value less costs to sell of assets held for sale may exceed the asset s carrying amounts either at the

initial classification date or on subsequent remeasurement under IFRS 5. In these circumstances, the

entity may need to record a gain arising from the reversal of previous impairment losses but with the

following conditions:

An impairment loss recorded under IAS 36 (prior to the held for sale classification) or under

IFRS 5 (at or after the classification) has previously reduced the carrying amounts of the assets under

review;

The potential gain does not exceed cumulative impairment losses previously recognized under

IAS 36 or IFRS 5 (IFRS 5.22 (b));

The carrying amounts of assets excluded from the measurement scope of IFRS 5 are not affected by a

reversal of a previous write-down of other assets; and a previous write-down of goodwill is not reversed.

In summary, reversal of previous impairment losses may only be recognized in relation to nongoodwill

assets that are within the measurement scope of IFRS 5.

Challenges in applying IFRS 5 21

3. Measurement implications of a change in or withdrawal from the selling plan

If an entity determines that a previous held for sale classification for an asset or a disposal group is no

longer appropriate, it needs to reclassify the assets and liabilities. Firstly, the entity stops presenting the

assets and related liabilities as held for sale. This change is made prospectively (ie without adjustments to

comparatives). The assets and liabilities are reclassified based on their normal IFRS presentation.

Example: Reversal of previous impairment losses

Fair value less costs to sell of a disposal group s assets has been determined at CU 12,000. The current

carrying amount of the assets has been determined at CU 8,200, which already reflects the remeasurement

of all assets that are excluded from the scope of IFRS 5. An analysis of the individual carrying amounts

prior to a potential reversal of impairment losses is as follows:

Prior to IFRS 5 reversal previously recognized write-down on assets After IFRS 5 reversal

Assets CUs CUs CUs

Goodwill 1,500 (1,500) 1,500

Other intangible assets 1,000 (500) 1,500

Property, plant and equipment 2,000 (2,000) 4,000

Inventory 1,500 - 1,500

Deferred tax asset 1,700 (1,000) 1,700

Trade receivables 500 (500) 500

8,200 (5,500 ) 10,700

The middle column summarizes write-downs that have previously been allocated to the individual

categories of assets. Goodwill impairment losses are never reversed. The carrying amount of goodwill

therefore remains at CU 1,500. Previous write-downs of the deferred tax asset or the trade receivable are

outside the measurement scope of IFRS 5 and have already been remeasured in accordance with IAS 12

and IAS 39, respectively. Further changes in the carrying amount of these assets are therefore not

permitted. The entity should only book a reversal of a previously recognised impairment loss for other

intangible assets (CU 500) and property, plant and equipment (CU 2,000). This increases the carrying

amount of the disposal group to CU 10,700, which is the upper limit set by IFRS 5 despite the disposal

group s fair value less costs to sell being CU 12,000.

Challenges in applying IFRS 5 22

Secondly, assets within the measurement scope of IFRS 5 are remeasured to reflect the carrying amounts

the assets would have had in the absence of the held for sale classification. The entity therefore

determines at the date of ceasing the held for sale classification:

a The recoverable amount of the assets under review (ie the higher of value in use and fair value less

costs to sell as estimated in accordance with IAS 36); as well as

b The carrying amount the assets would have been recorded at in the absence of their classification as

held for sale, thus reflecting potential depreciation, amortisation or revaluation not booked because of

IFRS 5.

The assets (including goodwill, if any) are recorded at the lower of the two amounts (IFRS 5.27).

This requirement also applies to individual assets that are removed from a disposal group while the

disposal group continues to be measured in accordance with IFRS 5 as a whole. Remeasurement of

individual assets within the measurement scope of IFRS 5 is necessary in circumstances in which the

entity continues to present only individual assets as held for sale, rather than a disposal group.

Any resulting gain or loss should be presented in line with the general requirements set out by IAS 1

Presentation of Financial Statements and other standards in the period that the change in the selling plan

occurs. Gains or losses should be presented as part of the results of continuing operations, except where

the gain or loss relates to assets that are accounted for in accordance with the revaluation model in IAS 16

Property, Plant & Equipment or IAS 38 Intangible Assets. In this case, the gain or loss is treated as a

revaluation increase or decrease (IFRS 5.28).

Challenges in applying IFRS 5 23

Example: Measurement effects of a withdrawal from the selling plan

Entity A has changed its intentions regarding the disposal of its subsidiary B. For the

remeasurement of the disposal group s assets, an analysis of the assets' carrying amounts under IFRS 5

and a remeasurement to the recoverable amount of the assets in accordance with IAS 36 is carried out.

The recoverable amount of the assets is estimated at CU 8,900. Entity A also assesses how much

depreciation, amortisation or revaluation would have been recognised for the assets concerned if they had
not been classified as held for sale. This information is reconciled to the assets' new carrying amounts as

follows:

Carrying amount under IFRS 5 Impairment losses recognized under IFRS 5 Depreciation & amortization New carrying

amount

Assets CUs CUs CUs CUs

Goodwill 1,500 (1,500) - 3,000

Other intangible assets 1,000 (500) 200 1,300

Property, plant and

equipment

2,000 (1000) 400 2,600

Inventory 1,500 - - 1,500

Trade receivables 500 - - 500

6,500 3,000 600 8,900

The impairment losses recognised under IFRS 5 for the other intangible assets and property,

plant and equipment are reversed in full. The depreciation and amortisation charge that

would have been recognised without their classification as held for sale in turn reduces their

carrying amounts.

Given the recoverable amount of the disposal group s assets, the amount recognised for

goodwill is fully restated to its carrying amount directly before it was classified as held for

sale. If the recoverable amount had been lower, goodwill would have been restated to the

extent that the total carrying amount of the former disposal group would not exceed its

recoverable amount. However, an entity should not under any circumstances reverse an

impairment loss that was recognised under IAS 36 prior to the disposal group s held for sale

classification.

Challenges in applying IFRS 5 24

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D. Presenting discontinued operations and

assets held for sale, and related disclosure

requirements
As discussed in previous sections, IFRS 5 applies to a range of situations. Careful consideration of

the standard s rules on classification and measurement is necessary before the resulting presentation

and disclosure requirements are applied. IFRS 5 contains detailed presentation and disclosure

requirements to enable users of the financial statements to evaluate the effects of assets held for sale

and discontinued operations:

If an entity classifies assets as held for sale, the main rules for their presentation in the entity s

financial statements and the related disclosures are set out in IFRS 5.38-42. Classifying assets as

held for sale also triggers a number of disclosure requirements that are set out by other standards.

If the entity identifies discontinued operations, IFRS 5.33-36 set out the main requirements for

presentation and the related disclosures. Additional requirements arise from other standards.

Some of the disclosures also depend on whether an entity presents both discontinued operations

and assets held for sale and how these are related to one another.

1. Assets held for sale and disposal groups: Presentation and disclosures

The minimum presentation requirements for assets held for sale and disposal groups are set out in

IFRS 5.38:

An entity shall present a non-current asset classified as held for sale and the assets of a disposal group

classified as held for sale separately from other assets in the statement of financial position.

The liabilities of a disposal group classified as held for sale shall be presented separately from other

liabilities in the statement of financial position.

Those assets and liabilities shall not be offset and presented as a single amount.

The major classes of assets and liabilities classified as held for sale shall be separately disclosed

either in the statement of financial position or in the notes, except as permitted by paragraph 39.

An entity shall present separately any cumulative income or expense recognised in other

comprehensive income relating to a non-current asset (or disposal group) classified as held for sale.

(IFRS 5.38, emphasis added)

1.1 Presentation in the statement of financial position

Assets held for sale and disposal groups are commonly presented in a line item labelled "asset(s)

held for sale" or "disposal group". If the disposal group includes liabilities, these might be presented

as "disposal group liabilities" or also simply as "disposal group". These lines items should be

included within current assets or liabilities, since the entity intends to transfer them within the one

year period assumed as part of their held for sale classification.

Challenges in applying IFRS 5 25

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Prior period comparatives are not adjusted for current period changes in the held for sale

classification (IFRS 5.40). This restriction can cause confusion as IFRS 5 includes a requirement to

retrospectively present the results of discontinued operations by amending the prior year s statement

of comprehensive income and the related disclosures (see page 26). As explained previously, "held

for sale" and "discontinued operations" are different concepts and IFRS 5 takes different

approaches to the adjustment of comparatives.

The entity also needs to present separately any gains and losses that have been recognised outside

profit or loss in respect of held for sale assets and disposal groups. For example, if a disposal group

comprises:

available for sale financial assets as defined in IAS 39 Financial Instruments: Recognition and

Measurement;

defined benefit liabilities for which actuarial gains and losses are recognised outside profit or loss

as permitted by IAS 19 Employee Benefits; or

property, plant or equipment assets that are stated at revalued amounts in accordance with

IAS 16,

the related gains, losses and income taxes are presented separately from other items in the statement

of comprehensive income and/or in the statement of other comprehensive income.

1.2 Disclosures

Disposal groups and assets held for sale should be analysed into their major classes of assets and
liabilities. This analysis may be done either on the face of the statement of financial position or in

the notes thereto. However, specific exemptions apply for subsidiaries that are newly acquired

exclusively with a view to resale (see page 35).

In the period in which the entity has classified or sold the non-current asset classified as held for

sale or a disposal group, it also needs to disclose the following information:

(a) a description of the non-current asset (or disposal group);

(b) a description of the facts and circumstances of the sale, or leading to the expected disposal, and the

expected manner and timing of that disposal;

(c) the gain or loss recognised in accordance with paragraphs 20 22 and, if not separately presented on

the face of the income statement, the caption in the income statement that includes that gain or loss;

(d) if applicable, the reportable segment in which the non-current asset (or disposal group) is presented in

accordance with IFRS 8 Operating Segments. (IFRS 5.41)

In summary, it is necessary to explain what the entity is selling as well as how and when it intends to

sell it. If a gain or loss has been recognised in measuring held for sale assets in accordance with

IFRS 5 the relevant amount and line item in the statement of comprehensive income is disclosed.

This amount, however, excludes any gains or losses on the remeasurement before the actual held for

sale classification or when the entity withdraws from a highly probable selling plan. If a gain or loss

on the remeasurement of assets held for sale relates to a discontinued operation, it is usually

included in net result from discontinued operations . This is further explained in the next section.

Challenges in applying IFRS 5 26

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2. Discontinued operations: presentation and disclosures

2.1 Presentation in the statement of comprehensive income

IFRS 5 and IAS 1 both specify minimum requirements for presentation of discontinued operations

(that are in substance identical):

An entity shall disclose:

(a) a single amount on the face of the income statement comprising the total of

(i) the post-tax profit or loss of discontinued operations and

(ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the

disposal of the assets or disposal group(s) constituting the discontinued operation ( ). (Extract from

IFRS 5.33 (a), similar to IAS 1.82 (e))

The exact description of this single line item is not prescribed by IFRS. As a generic description,

however, it is usually referred to as net result from discontinued operations . The three main

components of this line item in the statement of comprehensive income may be illustrated as

follows:

A Pre-tax result from discontinued operations

+/- Taxes relating to ordinary result from discontinued operations (if any)

B +/- Gains and losses resulting from remeasurement of assets held

for sale or disposal groups constituting the discontinued operation (if any)

+/- Taxes relating to gains and losses from remeasurement of assets

held for sale (if any)

C +/- Gains and losses resulting from the disposal of assets held

for sale or disposal groups constituting the discontinued operation (if any)

+/- Taxes relating to gains and losses from disposal of assets

held for sale (if any)

= Net result from discontinued operations

IFRS 5.33 (a) only relates to assets held for sale or disposal group(s) that constitute the discontinued

operation. Some gains and/or losses, however, may result from the remeasurement or the disposal

of assets held for sale that do not relate to the discontinued operation(s). If a gain or loss relates to

continuing operations, it must not be presented within discontinued operations (IFRS 5.37).

The single line item in the statement of comprehensive income and any related notes include

income taxes. As the definition of income taxes within IAS 12 encompasses both current and

deferred taxes, net result from discontinued operations should also include the effects of any

deferred taxes that relate to the discontinued operation.

2.2 Comparatives

One of the challenges in presenting discontinued operations is IFRS 5 s requirement to restate

comparatives on the face of the statement of comprehensive income. This is intended to assist
users of the financial statements in evaluating the financial effects of discontinued operations across

reporting periods.

Challenges in applying IFRS 5 27

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Net result from discontinued operations is presented for all reporting periods covered in the

statement of comprehensive income (IFRS 5.34). This affects both results from (previously)

continued operations and discontinued operations. An entity therefore needs to update all

explanatory notes relating to income and expense generated or incurred by continued operations.

This may, for example, include prior and current period disclosures about:

The major components of income tax expense;

The amount of each significant category of revenue;

The amount recognised as an expense for a defined contribution plan.

2.3 Disclosures

Net result from discontinued operations as presented on the face of the statement of

comprehensive income has to be further analysed into its components. At a minimum, the entity

needs to disclose:

Revenue, expenses and pre-tax profit or loss of discontinued operations;

Income taxes related to pre-tax profit or loss of discontinued operations;

The gain or loss recognised on the measurement at fair value less cost to sell or on the disposal of

the assets or disposal group(s) constituting the discontinued operation; and

Income taxes on remeasurement or disposal of assets or disposal group(s) constituting the

discontinued operation (IFRS 5.33 (b)).

This analysis may be set out either on the face of the statement of comprehensive income or in the

notes. Specific exemptions apply for subsidiaries that have been acquired exclusively with a view to

resale (see page 35).

In practice, these minimum requirements are often met by using an amended version of the layout
used for the entity s statement of comprehensive income, which is included in the notes to the

financial statements. This format then illustrates each of the discontinued operation s line items as

they would have been presented if the operation had continued.

IFRS 5 does not specify the exact level of detail to be provided in the analysis of net result from

discontinued operations. The standard also does not refer to situations involving more than one

discontinued operation. However, IFRS 5.33 (a) would seem to require presentation of a single

amount for the results of all discontinued operations in aggregate. In our view, the further analysis

of this single amount required by IFRS 5.33 (b) should preferably disaggregate the single amount

into each significant discontinued operation. In practice, this disaggregated information is likely to

be given in the notes.

2.4 Cash flows resulting from discontinued operations

The entity also needs to present cash flows from operating, investing and financing activities of the

discontinued operations. These amounts may either be incorporated into the statement of cash

flows or given in the notes (IFRS 5.33 (c)). This analysis is not necessary for newly acquired

subsidiaries that are immediately classified as held for sale.

Some acceptable layouts

seen in practice that are

used to meet these

requirements are

illustrated on page 32.

Challenges in applying IFRS 5 28

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3. Changes in a plan to sell

If an entity stops classifying assets as held for sale, it has to describe the facts and circumstances

that led to its withdrawal from the initial selling plan (IFRS 5.42). This explanation may for example

include the fact that no buyer could be found at an acceptable price or that conditions imposed on

the sale have resulted in the withdrawal of the asset or disposal group from the market. The entity

also describes the effect of the decision on the results of operations for all periods presented in the
financial statements (IFRS 5.42). This disclosure would include any revaluation gain/loss on

reclassification. Reclassification of any prior period balances of held for sale assets and related

liabilities is, however, not permitted. IFRS 5.42 applies equally to changes in a disposal group if

the reclassification, for example, only affects individual assets of a disposal group, the financial

statements should explain the reasons for changing the composition of the disposal group.

The amounts presented on the face of the statement of comprehensive income and in the notes are

restated (IFRS 5.36) if the assets that the entity ceases to classify as held for sale also represented a

discontinued operation. The entity reclassifies net result from discontinued operations into

continuing operations for the current period and restates all comparatives. Explanatory notes

relating to continuing operations (such as operating segment information) are also restated to reflect

the continuation of the operation in question.

4. Post-disposal results from discontinued operations

Some disposal transactions are subject to ongoing contingencies that may affect future periods

results. Any income or expense directly related to the disposal of a discontinued operation in a prior

period is presented separately within the result of discontinued operations (IFRS 5.35). Examples of

circumstances when this might arise include adjustments to the purchase price, previously

unanticipated income tax effects or the transfer of legal obligations to the buyer.

5. Example presentation layouts and selected explanatory notes thereto

5.1 Assets held for sale and disposal groups

Assets that are classified as held for sale and any associated liability are presented separately on the

face of the statement of financial position (IFRS 5.38). An analysis of these amounts is required

either on the face of the statement of financial position or in the explanatory notes thereto. The

following paragraphs set out example presentation layouts based on an illustrative disposal

transaction of a business unit that comprises both a disposal group and a discontinued operation.

The example does not cover all the disclosures that IFRS may require in relation to such a

transaction, such as those required by IAS 7 Statement of Cash Flows.

In the example HFS represents held for sale items and XXX other items.

Prior period adjustments

of the statement of

comprehensive income

will be required in

situations in which an

entity withdraws from its

plans to discontinue an

operation. The

withdrawal from a plan to

sell however does not

result in an adjustment of

the presentation of

comparatives in the

statement of financial

position.

IFRS 5.35 requires that

the income and

expenses related to a

discontinued operation

are presented separately

as a net result from

discontinued operations

in the entity s statement

of comprehensive

income, even in reporting

periods after the selling

transaction has been

completed.

Challenges in applying IFRS 5 29

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Single line items on the face of the statement of financial position with further analysis in the

notes

The most common approach to presenting held for sale assets and disposal groups is to present
single line items on the face of the statement of financial position and include any further analysis in

the notes thereto.

Notes

31 December

2007

CU000s

31 December

2006

CU000s

Assets
Goodwill X XXX XXX

Property, plant and equipment X XXX XXX

Deferred tax assets X XXX XXX

Non-current assets XXX XXX

Inventories X XXX XXX

Trade and other receivables X XXX XXX

Cash and cash equivalents X XXX XXX

Disposal group X HFS HFS

Current assets XXX XXX

Total assets XXX XXX

Equity and liabilities

Share capital X XXX XXX

Additional paid-in capital X XXX XXX

Retained earnings XXX XXX

Equity XXX XXX

Pension and other employee obligations X XXX XXX

Borrowings X XXX XXX

Deferred tax liabilities X XXX XXX

Non-current liabilities XXX XXX

Provisions X XXX XXX

Pension and other employee obligations X XXX XXX

Trade and other payables X XXX XXX

Disposal group X HFS HFS

Current liabilities XXX XXX

Total liabilities XXX XXX

Total equity and liabilities XXX XXX

An example of the related notes is shown on the next page.

Challenges in applying IFRS 5 30

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Single line items on the face of the statement of financial position with further analysis in the

notes (continued)

Note X: Disposal group

IFRS 5.41 (a) - (d) At the end of 2006, management decided to discontinue in-store sale of IT and

telecommunications hardware. This decision was taken in line with the Group's strategy to

focus on its web-based online retail business. Consequently, all assets and liabilities of

Highstreet Ltd. and its subsidiaries were classified as a disposal group. Measurement of the

disposal group s assets at fair value less costs to sell resulted in a loss of XXX, which is

included in net result from discontinued operations.

Highstreet Ltd. and most of its subsidiaries were sold for a total of CUXXXXX in cash on 30

September 2007. The sales transaction resulted in a loss of CUXXX due to related selling

costs.

A significant part of the assets originally classified as held for sale has therefore already been

sold at the balance sheet date. The Group has retained ownership of some former Highstreet

storage facilities. The Group's management expects to sell the remaining assets during 2008.

Assets held for sale were not allocated for segment reporting purposes.

IFRS 5.38 The carrying amounts of assets and liabilities in the disposal group may be analysed as

follows:

Assets 2007

CU000s

2006

CU000s

Liabilities 2007

CU000s

2006

CU000s

'000s '000s '000s

'000s
Goodwill XXX XXX

Deferred tax

liabilities XXX XXX

Property, plant and

equipment XX XX Provisions XXX XXX

Inventories XXX XXX

Cash and cash

equivalents XXX XXX

Total assets of the

disposal group XXX XXX

Total liabilities of

the disposal group

XXX XXX

Challenges in applying IFRS 5 31

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5.2 Discontinued operations

IFRS 5 sets out minimum requirements for presenting net result from discontinued operations and

the analysis thereof, which may be done either on the face of the statement of comprehensive

income or the notes thereto.

The following paragraphs set out example presentation layouts. In the following examples DO

represents amounts relating to discontinued operations and CO amounts that relate to continuing

operations. Example narratives are shown in option 1, but more details may be necessary to meet

the general objective of IFRS 5.30.

The illustrations of the statement of comprehensive income are based on the "two statement"

approach permitted by IAS 1.81(b) and do not include the separate statement of components of

other comprehensive income.

Option 1: Single line item on the face of the statement of comprehensive income with further

analysis in the notes

One of the more commonly used approaches is to present discontinued operations on the face of

the statement of comprehensive income as a single line item with further details on their
composition in the notes to the financial statements. The following example assumes that there are

no minority shareholders and no gains or losses that have been recognised outside profit or loss

(additional line items would otherwise be necessary).

Notes 2007

CU000s

2006

CU000s

Revenue X CO CO

Other income CO CO

Costs of material (CO) (CO)

Employee benefits expense X (CO) (CO)

Depreciation and amortisation (CO) (CO)

Operating Result CO CO

Result from equity accounted investments X CO CO

Finance costs X (CO) (CO)

Result from continuing operations before tax CO CO

Income taxes X (CO) (CO)

Net result from continuing operations CO CO

Net result from discontinued operations X DO DO

Net result for the period CO CO

The amounts included in the line item highlighted are then further analysed in the notes to the

financial statements.

Challenges in applying IFRS 5 32

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Option 1: Single line item on the face of the statement of comprehensive income with further

analysis in the notes (continued)

Note X: Discontinued operations

At the end of 2007, management decided to discontinue in-store sale of IT and

Telecommunications hardware. This decision was taken in line with the Group's strategy to

focus on its web-based online retail business. Revenue and expenses, and gains and losses

relating to the discontinuation of this activity have been removed from the results of continuing

operations and are shown as a single line item on the face of the statement of comprehensive

income ( net result from discontinued operations ). The operating results of the discontinued
operation up to its disposal and the effect of remeasurement and disposal of assets that were

classified as held for sale were as follows:

Operating activities of discontinued operations 2007

CU000s

2006

CU000s

IFRS 5.33 (b)(i) Revenue DO DO

Costs of material (DO) (DO)

Employee benefits expense (DO) (DO)

Depreciation and amortisation (DO) (DO)

Other operating expenses (DO) (DO)

Operating Result DO DO

Finance costs (DO) (DO)

Result from discontinued operations before taxation DO DO

IFRS 5.33 (b)(ii) Tax expense (DO) (DO)

Net operating result from discontinued operations DO DO

Measurement and disposal of assets held for sale

IFRS 5.33 (b)(iii) Gain (loss) on measurement - (DO)

Gain on disposal DO -

IFRS 5.33 (b)(iv) Tax expense (DO) DO

Net gain (loss) from discontinued operations DO DO

Net result from discontinued operations DO DO

In this example, Net result from discontinued operations comprises the results from the

discontinued operation and the effects of remeasurement and disposal of any assets or disposal

groups that constitute the discontinued operation. Also note that the analysis includes two tax line

items:

Taxes relating to the operating activities of the discontinued operation until their disposal; and

Tax effects of remeasurement and disposal of the related assets held for sale or disposal groups.

The result in the highlighted line corresponds to the amount that is presented on the face of the

statement of comprehensive income.

Challenges in applying IFRS 5 33

© 2008 Grant Thornton International Ltd All rights reserved.

Option 2: Analysis of the results of discontinued operations on the face of the statement of

comprehensive income (columnar format A)

Net result from discontinued operations along with the required analysis of that result are presented

on the face of the statement of comprehensive income. The analysis of discontinued operations

should be clearly distinguished from the results of continuing operations. For example, it should be

clear that the amount presented as the reporting entity s revenue excludes revenue of the

discontinued operation. The detailed analysis of the results of the discontinued operation is

supplemental information on the face of the statement of comprehensive income. This format, or

variations of it, is commonly used when the discontinued operation is or was a very substantial part

of total operations.

Notes

2007

CU000s

2006

CU000s

Discontinued

operations Entity

Discontinued

operations Entity

Revenue X DO CO DO CO

Other income DO CO DO CO

Costs of material (DO) (CO) (DO) (CO)

Employee benefits expense X (DO) (CO) (DO) (CO)

IFRS 5.33 (b) (i)

Depreciation and amortisation (DO) (CO) (DO) (CO)

Operating result DO CO DO CO

Result from equity accounted

investments X DO CO DO CO

Finance costs X (DO) (CO) (DO) (CO)

Result from operations before tax DO CO DO DO

Income taxes X (DO) (CO) (DO) (CO)

IFRS 5.33 (b) (ii)

Net result for the period from operations DO CO DO CO

IFRS 5.33 (b) (iii) Measurement and disposal of

assets held for sale

Gain (loss) on measurement DO (DO)

Gain on disposal DO -

IFRS 5.33 (b) (iv) Tax expense (DO) DO

Net gain (loss) from

discontinued operations DO (DO)

Net result from discontinued

operations X DO DO

IAS 1.82 (f) Net result for the year CO+DO CO+DO

Challenges in applying IFRS 5 34

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Option 3: Analysis of the results of discontinued operations on the face of the statement of

comprehensive income with total column (columnar format B)

Another approach observed in practice is to present both results from discontinued operations and

continued operations side by side and show a total of both on a line-by-line basis. Gains and losses

from remeasurement, the sale of the discontinued operations and related taxes are then presented

separately. Some commentators regard this approach as questionable, on the grounds that the

total column gives undue prominence to the revenue and amounts that include the activities of

the discontinued operation. In our view, this approach is acceptable provided it is clear that

revenue, other income and expenses (excluding the discontinued operation s amounts) are clearly

labelled to represent continued operations.

Note that the example below omits prior-year comparatives for ease of presentation. Comparatives

are necessary for all amounts, narrative and other descriptive information, unless otherwise

permitted by a standard or interpretation.

Notes 2007

CU000s

Discontinued

operations

Continuing
operations

Total

Revenue X DO CO DO+CO

Other income DO CO DO+CO

Costs of material (DO) (CO) (DO)+(CO)

Employee benefits expense X (DO) (CO) (DO)+(CO)

IFRS 5.33 (b) (i)

Depreciation and amortisation (DO) (CO) (DO)+(CO)

Operating result DO CO DO+CO

Result from equity accounted

investments

X DO CO DO+CO

Finance costs X (DO) (CO) (DO)+(CO)

Result from operations before tax DO CO DO+CO

IFRS 5.33 (b) (ii) Income taxes X DO (CO) DO+(CO)

Net result from operations DO CO DO+CO

IFRS 5.33 (b) (iii) Measurement and disposal of

assets held for sale

Gain (loss) on measurement DO DO

Gain on disposal DO DO

IFRS 5.33 (b) (iv) Tax expense (DO) (DO)

Net gain (loss) from discontinued

operations

DO DO

IFRS 5.33 (a) Net result from discontinued

operations

X DO DO

Net result for the year DO CO DO+CO

Challenges in applying IFRS 5 35

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E. Practical implementation issues

This section focuses on some of the other common questions and issues that arise in practice in

implementing IFRS 5. The issues discussed are:

Accounting for assets that were acquired exclusively with a view to resale;

Part-disposals of subsidiaries;

Applying IFRS 5 in separate financial statements;

Measurement of liabilities that are associated with a disposal group;

Intragroup transactions and balances; and

Further disclosure requirements.

1. Assets acquired exclusively with a view to resale

Subsidiaries are sometimes acquired exclusively with a view to resale. This may be due to the

acquirer s intention to restructure the target company as an immediate action after obtaining control.

Legal requirements such as antitrust laws to transfer parts of the acquiree to a third party may

sometimes result in plans to sell parts of an acquired business. Similar situations may arise when an

entity acquires a group of assets or individual assets that it intends to sell immediately.

1.1 Held for sale classification

Provided that, within a short period following the acquisition, the subsidiary or asset(s):

is (are) available for immediate resale (IFRS 5.7); and

a sale is considered highly probable (IFRS 5.8)

the acquired asset(s) or subsidiary is (are) classified as held for sale upon initial recognition. The

standard considers a short period following the acquisition to be usuallywithin three months

(IFRS 5.11). In determining which assets and liabilities are attributable to the disposal group

concerned, the entity follows the general guidelines of IFRS 5 that were discussed on page 9.

1.2 Consolidation of a subsidiary acquired exclusively with a view to resale

It is mandatory under IAS 27 Consolidated and Separate Financial Statements to fully consolidate all

subsidiaries of the parent company. The held for sale classification of the subsidiary and its assets

and liabilities does not change this requirement.

The held for sale classification of such a subsidiary will however affect the presentation of its assets

and liabilities. Assets and liabilities of the subsidiary will be part of a disposal group. Subsequent
financial results of the subsidiary are shown within results of discontinued operations (IFRS 5.32(c)).

Challenges in applying IFRS 5 36

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1.3 Initial measurement

If the assets acquired exclusively with a view to resale were acquired in a business combination, they

are subject to the provisions of IFRS 3 Business Combinations. Broadly, the assets, liabilities and

contingent liabilities are initially recognised at fair value less costs to sell (IFRS 5.16).

If the asset(s) have not been acquired in the course of a business combination, they will be initially

measured at the lower of their carrying amount and fair value less costs to sell. The carrying amount

of each individual asset is determined in accordance with the applicable standard. Many newly

acquired assets are initially recognised at cost, which may be higher than their fair value less costs to

sell. Consequently, application of IFRS 5 may result in an immediate loss.

1.4 Financing costs and income taxes

One question raised in practice is how to account for financing costs and potential tax effects that

are a direct result of reselling the newly acquired subsidiary. IFRS 5 specifically excludes financing

costs and income tax expenses from its definition of costs to sell .

IAS 12 Income Taxes generally requires the entity to account for all income tax consequences of the

future recovery or settlement of the carrying amount of assets and liabilities. Future tax

consequences of reselling newly acquired assets may therefore be reflected in the recognition of a

deferred tax liability. For individual assets, a deferred tax liability is recognised for all taxable

temporary differences that are not specifically exempted by IAS 12. For example, if fair value less

costs to sell or the carrying amount of an asset that is classified as held for sale exceeds its tax base,

this results in the recognition of a deferred tax liability that reflects the potential tax consequences of

selling the asset. Where a disposal group represents a subsidiary that was acquired with an exclusive

view to resale, the specific rules in IAS 12 regarding "outside basis differences" may apply (see

page 37 for further discussion).

1.5 Presenting discontinued operations

Subsidiaries that are acquired and then immediately classified as held for sale are discontinued

operations (IFRS 5.32 (c)). An entity therefore presents all results of these subsidiaries, including

any gains and losses that arise on the subsequent remeasurement or sale of the underlying assets, as

net results of discontinued operations.

Businesses or groups of assets that were acquired for resale but are not a subsidiary are a

discontinued operation only if they represent a separate major line of business or geographical area

of operations (IFRS 5.32(a)-(b)).

1.6 Disclosures

Where a disposal group is a subsidiary that has been acquired exclusively with a view to resale, the

entity is not required to disclose the subsidiary s major classes of assets and liabilities (IFRS 5.39). A

specific exemption also relieves entities in these circumstances from further analysing net results or

cash flows from discontinued operations (IFRS 5.33(c)).

However, all other disclosure requirements of IFRS 5 and other standards apply in this situation.

IFRS 3 requires in particular disclosure of details of any operations the entity has decided to

dispose of as a result of the combination .

Challenges in applying IFRS 5 37

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2. Part-disposal of a subsidiary

IFRS 5 is currently not entirely clear on whether a subsidiary should be regarded as held for sale if

the entity plans to sell a controlling interest but also to retain some part of its interest (ie a part

disposal ). A part disposal of a subsidiary occurs when the parent company sells a controlling

interest in the subsidiary and:

Retains significant influence (so the former subsidiary will be accounted for using the equity

method in accordance with IAS 28 Investments in Associates); or

Retains joint control (so the former subsidiary will be accounted for in accordance with IAS 31

Joint Ventures); or

Remains a non-controlling shareholder without significant influence over the former subsidiary
(so the remaining interest in the former subsidiary will be accounted for in accordance with

IAS 39 Financial Instruments: Recognition and Measurement).

The IASBs First Annual Improvements Project includes a proposal that would require a held for

sale classification for all situations where an entity is committed to a selling plan that involves the

loss of control of a subsidiary. This would include situations in which the entity retains joint control

or significant influence over the former subsidiary. It seems appropriate to follow this approach in

anticipation of this potential change in IFRS 5.

3. Separate financial statements

IFRS 5 does not set out exemptions or specific requirements for individual or separate financial

statements and therefore has to be applied in the normal way. Some intra-group transactions might

trigger IFRS 5 s requirements even though those transactions will be eliminated on consolidation.

For example, if assets are transferred to the parent company or another legal entity within the group,

a held for sale classification may be appropriate from an individual entity s point of view, but not

from a group perspective. The same logic applies to discontinued operations.

IAS 27 addresses in paragraph 37 a specific situation in which an entity classifies as held for sale its

investment in a subsidiary, jointly controlled entity or associate. If the investment is measured at

cost prior to the held for sale classification in accordance with IAS 27 it is remeasured at the lower

of cost and its fair value less costs to sell (see page 18). If, on the other hand, the entity measures its

investment at fair value in accordance with IAS 39 Financial Instruments: Recognition and

Measurement, it

is outside of the measurement scope of IFRS 5 (IFRS 5.5 (c), see page 17).

4. Measurement of liabilities associated with a disposal group

IFRS 5 does not apply to the measurement of liabilities. If liabilities are included in a disposal group

(see page 9), the entity continues to measure these liabilities in accordance with the appropriate

IFRSs. This applies, in particular, to the following liabilities:

Defined employee benefit liabilities, which are measured in accordance with IAS 19;
Deferred and current tax liabilities, which are measured as required by IAS 12.;

Non-financial liabilities (ie provisions) which are measured as set out in IAS 37; and

Financial liabilities which are measured in accordance with IAS 39.

Existence of a sales

transaction

Reductions in the entity s

interest do not

necessarily require a

sales transaction. For

example, if the entity

does not participate in an

increase in capital of its

subsidiary, its share in

the subsidiary s net

assets and its voting

rights are diluted. A loss

of control may also be

triggered by legal actions

brought against the

entity. The absence of a

sales transaction

precludes, by definition,

a held for sale

classification of the

subsidiary s assets and

liabilities.

Challenges in applying IFRS 5 38

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The measurement of these liabilities follows the normal accounting policies of the entity, despite the

fact that they are not presented separately on the face of the statement of financial position but as

part of the disposal group (see page 24).

5. Intragroup transactions and balances

A practical issue arises in relation to transactions and balances between the entity s continued
operations and its discontinued operations (prior to the actual disposal of the latter). For example,

if a disposal group includes an intragroup receivable, is the related liability:

Included with group liabilities, with the receivable included in the disposal group s assets; or

Eliminated from the group statement of financial position, with the receivable also eliminated

from the disposal group s assets?

IFRS 5 does not include any exemption to applying IAS 27. All intragroup balances and

transactions are therefore eliminated in the group s consolidated accounts. As IFRS 5 complements

rather than overrides IAS 27, all intercompany balances and transactions must be eliminated in full.

Transactions between an entity s continued and discontinued operations are therefore not to be

presented on the face of the statement of financial position as they are subject to the usual

consolidation routines applicable for all intercompany transactions.

6. Related disclosure requirements in other IFRSs

It is important to note that the classification of assets as held for sale or the presentation of

discontinued operations not only triggers disclosure requirements under IFRS 5, but also affects the

preparation of financial statements under other standards.

6.1 Assets held for sale

As noted above, the entity should disclose the segment to which an asset held for sale or disposal

group belongs. In addition:

IAS 16.73 (e) (ii)

IAS 38.118 (e) (ii)

IAS 40.76 (c) (fair value model) and IAS 40.79 (d) (iii) (cost model)

IAS 41.50 (c)

require the disclosure of the carrying amount of assets that have been classified as held for sale or

included in a disposal group.

Deferred taxes

Special attention needs to be paid to deferred taxes when an entity classifies assets as held for
sale. Firstly, any measurement effects of applying IFRS 5 (ie impairment or a reversal

thereof) will usually trigger a change in temporary differences (calculated by comparing the

assets carrying amounts with their tax bases). Secondly, the tax consequences of a sale rather

than the continuing use of the assets may be different. As a result, different tax bases or tax

rates may apply which then need to be taken into account when calculating deferred taxes.

Thirdly, the sale plan may result in probable reversal of a temporary difference between the

tax base of an investment in a subsidiary, associate etc and its carrying amount. If the selling

plan sets out the disposal of a subsidiary, associate, branch or interest in a joint venture, the

deferred tax calculation needs to be specifically reviewed in the light of the pending sale

transaction.

Challenges in applying IFRS 5 39

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When assets are classified as held for sale, or included in a disposal group, the issue arises as to

whether other IFRS disclosures for that type of asset continue to apply. IAS 19 Employee Benefits,

IAS 12 Income Taxes or IFRS 7 Financial Instruments: Disclosures for example do not set out any

exemptions for assets and liabilities that have been included in a disposal group.

This question was referred to the IFRIC. The IFRIC have not added this issue to their agenda

although an agenda decision was published in IFRIC Update for September 2007. The IFRIC

expressed a preference to exclude items of a disposal group from disclosure requirements other than

specifically set out by IFRS 5 and IAS 1 and referred this issue to the IASB for consideration in its

First Annual Improvements Project. However, this issue was not addressed in the First Annual

Improvements Project. It therefore remains unclear at this stage.

6.2 Discontinued operations

The presentation of discontinued operations triggers a number of disclosure requirements by other

standards which may be summarised as follows:

Earnings per share (EPS)

IAS 33.68 requires entities to present EPS for both results from continuing operations as well as
discontinued operations. Because discontinued operations are to be presented for all reporting

periods covered in the statement of comprehensive income, the figures for both diluted and basic

EPS need to be restated for earlier periods.

Statement of cash flows and related notes

IAS 7 requires disclosure of information relating to the disposal of "subsidiaries or other business

units". While the term "business unit" is not further defined, we consider that an entity should

typically disclose the following, especially where subsidiaries are classified as discontinued

operations:

The total disposal consideration;

To what extent the disposal consideration was discharged by means of cash and cash equivalents;

and

The amount of cash and cash equivalents included in the discontinued operation that has been

disposed of.

IAS 7 also requires an analysis of the disposed group of assets by major categories of assets and

liabilities. This requirement is usually met by providing the information required by IFRS 5.38

regarding assets held for sale and related disclosures.

Income taxes

IAS 12.81 (h) requires disclosure of income tax expense relating to:

Gains and losses from discontinuance ie gains and losses on sale or remeasurement of the

underlying assets, asset groups or disposal groups; and

Ordinary activities from the discontinued operation for the current and all prior periods for

which the discontinued operation is presented.

These requirements in IAS 12 generally match those of IFRS 5.33 (b), which also requires the

separate disclosure of income tax effects resulting from a discontinued operation (see page 26).

Challenges in applying IFRS 5 40

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Segment reporting
If an entity prepares a segment report in accordance with IFRS 8 Operating Segments, it may need to

explain differences between the measurement of the reportable segments profit or losses and the

entity s profit or loss, including any net results from discontinued operations. The entity also takes

into consideration discontinued operations in reconciling the reportable segments measures of

profit or loss to the entity s profit or loss.

If the entity s segment reporting follows IAS 14 Segment Reporting, it is a mandatory requirement to

include both segment results from continuing and discontinuing operations, as appropriate. The

comparatives presented in the segment report for previous periods also need to be restated for any

discontinued operation the entity presents at its latest reporting date. Similar to IFRS 8, segment

results from discontinued operations also have to be reconciled to the entity s net result from

discontinued operations.

Challenges in applying IFRS 5 41

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