This article seeks to provide a comprehensive understanding of the key considerations for non-current assets held for sale and discontinued operations. It is essential for businesses to ensure compliance with IFRS 5 standards in compliance with the statutory regulations. Thus, corporations are advised to seek the services of trusted Audit Firms in Dubai that offer tailored solutions upon implementing IFRS 5 standards and to ensure compliance.
IFRS 5 involves 2 main aspects that request attention;
It is important to note that IFRS 5 relates to all non-current assets and leaves no room for exclusions. While there are detailed measurement exceptions outlined within the standard, the requirement remains to present and disclose information about these assets in alliance with IFRS 5.
To direct IFRS 5 effectively, you have to know about the following 2 essential concepts;
It emphasizes assets that are categorized as held for sale. IFRS 5 offers explicit standards for determining when an asset should be categorized as held for sale such as;
Understanding the accounting behavior and disclosure requirements for non-current assets held for sale is fundamental for correct financial reporting.
IFRS 5 reports the demonstration and disclosure requirements for discontinued operations. Discontinued operations state mechanisms of a body that have been disposed of or are categorized as held for sale. It represents a distinct major line of business or geographical area of operation. The standard frameworks specific standards for categorizing operations as discontinued and delivers direction on reporting their financial results distinctly.
Companies should categorize a non-current asset as held for sale if it is carrying expense and will be recovered primarily through a sale rather than continuing use.
Disposal group is a new perception introduced by IFRS 5. It signifies a group of assets and obligations to be disposed of together as a group in a distinct transaction.
For instance, when a business runs a small number of divisions and chooses to sell one division, then all assets (with PPE, catalogs, delayed tax, etc.) and all liabilities of that division would signify a disposal group.
The asset must be accessible for immediate sale in its present settings and the sale must be highly credible.
IFRS 5 sets some standards for the sale to be credible, these are;
Similar standards also apply to assets held for circulation to owners.
Once you classify an asset as held for sale, then you have to measure it under IFRS 5. Though, IFRS 5 lists some measurement exceptions that are;
When you categorize any of the above sorts of assets as assets held for sale, you stay measuring them under the same accounting guidelines as before sorting (for instance, financial instruments held for sale will be measured under IFRS 9, not IFRS 5).
Understanding the main considerations of IFRS 5 is important for companies dealing with non-current assets held for sale and discontinued operations. Complying with the accounting treatment, the demonstration outlined in IFRS 5 confirms transparent and compliant financial reporting. Therefore, companies are advised to seek the services of trusted Audit Firms in Dubai who offer tailored solutions upon implementing IFRS 5 standards in compliance with statutory regulations. Thus, contact us today and we shall be glad to assist you.
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Kasun Liyanage is an Audit Manager with over 7 years of experience dealing with diversified corporate clients. He not only manages the team’s work schedule but also is an expert in handling audit areas such as external audits and fraud investigation, Internal control benchmarking and best practices and well as preparation of financial statements and IFRS compliance.