IFRS in Practice — #5: IFRS 5
A company owns a building worth $1 million and decides to sell it.
Should it continue accounting for that building exactly as before?
Not necessarily.
IFRS 5 deals with non-current assets held for sale and discontinued operations.
An asset is classified as held for sale when its carrying amount will be recovered principally through a sale rather than through continuing use, provided the relevant criteria are met.
Once classified as held for sale, the asset is generally measured at the lower of:
• carrying amount; and
• fair value less costs to sell.
Depreciation generally stops.
💡 Example
Carrying amount: 1.000.000 $
Fair value less costs to sell: 920.000 $
The asset would generally be measured at:
920.000 $
An impairment loss of $80,000 would therefore arise in this simplified example.
IFRS 5 also establishes presentation requirements for discontinued operations.
In short: when management commits to selling a qualifying non-current asset, both measurement and presentation can change.
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