The income and expenses of the subsidiary are therefore not consolidated on a line-by-line basis with the income … Available-for-sale (AFS) is an accounting term used to describe and classify financial assets. A non-current asset/disposal group is classified as held for distribution to owners when (IFRS 5.12A): The distribution is highly probable when: Non-current assets that are to be abandoned include assets that will be used to the end of their economic life or simply that will be closed rather than sold. It sets the presentation and disclosure requirements for discontinued operations. Paragraph 8A clarifies that when an entity is committed to a sale plan involving loss of control of a subsidiary, the entity classifies the assets and liabilities of that subsidiary as held for sale when the above criteria are met regardless of whether the entity retains a controlling interest in its former subsidiary after the sale. The aim of AASB 5 is to enable users to understand the performance of the continuing business. Subsidiaries already consolidated now held for sale. IFRS 5 specifies two main requirements to initially classify asset(s) as held for sale. This concerns, for example, foreign currency translation adjustments. However, there is a case when the parent has an influence on the subsidiary but does have the majority voting power. Additional disclosure requirements for assets held for sale and for disposal groups are set out in paragraphs IFRS 5.41-42. Once an asset is classified as “held for sale”, certain presentation and disclosures are required under IFRS 5 – Non-current assets held for sale and discontinued operations. Non-current assets/disposal groups classified as held for sale are measured at the lower of: Carrying value of a non-current asset/disposal group is the value determined under other applicable IFRS immediately before the initial classification as held for sale (IFRS 5.18). is a subsidiary acquired exclusively with a view for resale. This subsidiary will also deal as held for sale if the parent only partially sells the subsidiary and hold a non-controlling interest in that company. FRS 5, Non-current Assets Held for Sale and Discontinued Operations Executive summary 10 2.1 Scope 10 2.2 Key definitions introduced by FRS 5 11 2.3 Held for sale 11 2.4 Disposal group 12 ... subsidiary are granted options over shares in the parent company, the subsidiary will have to On top of it, you also need to calculate group’s gain or loss on disposal of subsidiary … It usually for investment less than 50%, so we cannot use this method for the subsidiary. Single Line “Discontinued operations” - PAT of the Sub + gain/loss on re-measurement to held for sale. it is unlikely that significant changes to the distribution will be made or that the distribution will be withdrawn. An example of such a specific requirement relates to interests in other entities which are still under the scope of IFRS 12 even if classified as held for sale and/or treated as discontinued operations (IFRS 12.5A). Does not result in cessation of consolidation. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). Mommy held a subsidiary during the full year of 20X6 and therefore yes, you DO NEED to aggregate all parent’s and subsidiary’s revenues and expenses and eliminate intragroup transactions. This must be recognised in profit or loss, even for assets previously carried at revalued amounts. The "long-term investment" language relates to the recording of fx gains and losses on intercompany receivable/payable and the subsidiaries intent to repay the loan. Therefore their values do not have to be shown at their market value necessarily (as your intention is not to sell them), So maybe market value is a better value to use, but they haven’t been sold yet, so showing them at MV might still not be appropriate as this value has not yet been achieved. A subsidiary classified as 'held for sale', is included in the definition of a discontinued operation, with treatment as follows: Income statement. When assets or liabilities included in a disposal group are not within the scope of IFRS 5 (i.e. Use at your own risk. So, think about this for a moment.. Why does this matter to users? Sale of Subsidiary. When the asset/disposal group ceases to be classified as held for sale is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate, comparative information in financial statements should be adjusted retrospectively. There is obviously a great incentive for entities with loss making businesses to classify them as discontinued operations and to present a much better set of results from continuing operations. An asset/disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (IFRS 5.7). fair value less costs to distribute, where costs to distribute are the incremental costs directly attributable to the distribution, excluding finance costs and income tax expense (IFRS 5.15A). First, I want to highlight the interaction of held for sale accounting with the held for use model. However, an entity should provide disclosures specified in paragraph IFRS 5.41(a)(b)(d) in the notes (IFRS 5.12). A discontinued operation is a component of an entity that has been disposed of, or classified as “held for sale”. inventories) or not recognise this part of impairment at all (see also IFRIC January 2016 update). Therefore assets to be abandoned would still be depreciated. Assets held for sale. The measurement provisions of IFRS 5 do not apply to assets listed in paragraph IFRS 5.5. Is part of a single co-ordinated plan to dispose of a separate major line of businesses or geographical area of operations, or 3. IFRS 5 is applied to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale. Assets of a class (e.g. Available-for-sale (AFS) is an accounting term used to describe and classify financial assets. This will qualify as held for sale under IFRS 5 and classify all the assets and liabilities of that subsidiary as held for sale. 8A An entity that is committed to a sale plan involving loss of control of a subsidiary shall classify all the assets and liabilities of that subsidiary as held for sale when the criteria set out in paragraphs 6–8 are met, regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale. There is no exemption for a sub­sidiary that had pre­vi­ously been con­sol­i­dated and that is now being held for sale. As a rule, costs to sell are measured at their present value if the sale is expected to occur beyond one year. The implications for the consolidated financial statements resulting from the fact that such a subsidiary A non-current asset/disposal group that ceases to be classified as held for sale or as held for distribution to owners should be measured at the lower of (IFRS 5.27): Carrying amount before an asset was classified as held for sale is adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset/disposal group not been classified as held for sale or as held for distribution to owners (IFRS 5.27). IFRS 5 applies to accounting for an investment in a subsidiary held only with a view to its subsequent disposal in the near future. Assets classified as held for sale and the assets and liabilities of a disposal group are presented separately from other assets in the statement of financial position, without offsetting. There is obviously a great incentive for entities with loss making businesses to classify them as discontinued operations and to present a much better set of results from continuing operations. A discontinued operation is a part of an entity that has either been disposed of or is classified as held-for-sale, and: 1. represents a separate major line of business or geographical area of operations 2. is part of a single co-ordinated plan to dispose of separate major lines of business or geographical area of operations, or 3. the subsidiary was acquired exclusively with a view to resale. Mommy held a subsidiary during the full year of 20X6 and therefore yes, you DO NEED to aggregate all parent’s and subsidiary’s revenues and expenses and eliminate intragroup transactions. For official information concerning IFRS Standards, visit IFRS.org. Recognition of difference between sale proceeds and Equity on the date of disposal in the consolidated profit and loss account and Capital Reserve / … Non-current assets held for sale If a non-current asset is 'held for sale', the economic benefit of that asset is obtained through the asset's sale rather than through its continuous use in the business (future economic benefit). A few related points to consider when you are evaluating held for sale. Revaluing to this amount might mean an impairment (revaluation downwards) is needed. the asset/disposal group must be actively marketed for sale at a price that is reasonable in relation to its current fair value. Assets held-for-sale are an exception to the fair value measurement principle used in most acquisition accounting, because they are measured at fair value less costs to sell. Well, the accounts show the business performance and position, and you expect to see assets in there that they actually are looking to continue using.