- 2 Marks
Question
In accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, a non-current asset (disposal group) is classified as “held for sale” if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. However, to qualify to be classified as held for sale, a detailed criteria must be met.
Required:
Identify any TWO criteria to be met before an asset can be classified as held for sale. (2 marks)
Answer
The following are two key criteria that must be met for an asset to be classified as held for sale in accordance with IFRS 5:
- The asset must be available for immediate sale in its present condition, and the sale must be highly probable. This implies that the entity is committed to selling the asset and has initiated an active program to locate a buyer.
- The sale must be expected to occur within 12 months from the date of classification as held for sale, unless circumstances beyond the entity’s control cause a delay.
(2 marks evenly spread)
- Tags: Discontinued Operations, Held for Sale, IFRS 5, Non-current Assets
- Level: Level 2
- Topic: Financial Reporting Standards and Their Applications
- Series: MAY 2018
- Uploader: Dotse