IFRS 5: non-current assets held for sale and discontinued operations

When a company decides to sell a factory, or an entire division, readers of its accounts need two things. They need to know that those assets are now on their way out, and valued at what they will fetch, not at what they once cost.

And they need to see the results of the business that is leaving separately from the business that is staying, so they can judge what the future company will look like. International Financial Reporting Standard (IFRS) 5, Non-current Assets Held for Sale and Discontinued Operations, does both.

This topic covers the sale of ordinary non-current assets, the three levels of IFRS 5 (non-current assets, disposal groups and discontinued operations), the criteria for classifying an asset as held for sale, measurement, allocation of an impairment loss in a disposal group, changes to a plan of sale, presentation and disclosure, the definition and presentation of discontinued operations, and the judgements.

The previous topics covered impairment. The next topics cover leases. November 2025 Question 6(a) tested held-for-sale accounting together with the interim reporting rules.

Key terms in plain English

Syllabus check

IFRS 5 is named in the syllabus as a standard on performance reporting. This topic covers:

• B1(b) applying IFRS 5, with IFRS 8, IFRS 15, International Accounting Standard (IAS) 33 and IAS 34, to the preparation of statements;
• B2(b) the treatment of non-current assets held for sale;
• C1(d) and C2(g) a subsidiary acquired exclusively with a view to resale, and amounts for discontinued, acquired or disposed parts of a group.

CAMA 2020 and held-for-sale assets

The Companies and Allied Matters Act 2020 (CAMA 2020) requires statements that follow IFRS and give a true and fair view.

Sale of ordinary non-current assets

An item of property, plant and equipment is derecognised on disposal or when no future benefits are expected. The gain or loss is net sale proceeds (after direct selling costs) less carrying amount, taken to profit or loss in the period of disposal and not included in revenue.

The three levels of IFRS 5

1. Non-current assets held for sale.
2. Disposal groups: a group of assets to be disposed of in a single transaction, with directly associated liabilities. It may be one or several cash-generating units, or part of one.
3. Discontinued operations: a disposal group that also meets extra criteria.

Scope. The classification and presentation rules apply to all recognised non-current assets and disposal groups. The measurement rules do not apply to deferred tax assets, assets from employee benefits, financial assets under IFRS 9, investment property at fair value, biological assets at fair value less costs to sell, and insurance contract rights. Those assets are measured under their own standards, even if they are part of a disposal group.

Abandonment. An asset or group that is to be used to the end of its life or closed, rather than sold, is not held for sale.

Classification as held for sale

The asset (or group) is classified as held for sale if its carrying amount will be recovered principally through a sale rather than continuing use. These conditions must be met at the reporting date:

1. it is available for immediate sale in its present condition, subject only to terms usual and customary for such sales;
2. the sale is highly probable: the appropriate level of management is committed to a plan, an active programme to find a buyer has started, and the asset is actively marketed at a price that is reasonable in relation to its current fair value; and
3. the sale is expected to be completed within one year of classification, and it is unlikely that the plan will change significantly or be withdrawn.

A delay beyond one year is allowed if it is caused by events outside the entity’s control and there is enough evidence that the entity remains committed to the plan.

Timing. If the criteria are met only after the reporting date but before the statements are authorised, the asset is not classified as held for sale at the reporting date, though disclosures are made.

Measurement

An asset or group held for sale is measured at the lower of carrying amount and fair value less costs to sell.

• If fair value less costs to sell is below carrying amount, write the asset down. The loss is an impairment loss in profit or loss, or in other comprehensive income to the extent of a revaluation surplus on that asset, with any excess in profit or loss.
• If it is above carrying amount, there is no adjustment and no gain is recognised on classification. The gain arises when the asset is sold.
• Depreciation and amortisation stop while the asset is held for sale.

Impairment loss in a disposal group

The assets within the IFRS 5 measurement scope absorb the loss in this order: goodwill first, then the other non-current assets in scope pro rata to carrying amounts. Assets outside the scope, such as inventory and financial assets, are first remeasured under their own standards and take no share of the loss.

Later changes

A later fall in fair value less costs to sell is a further impairment loss. A later rise is recognised as a gain, but not above the cumulative impairment loss already recognised, whether under IFRS 5 or earlier under IAS 36.

Change of plan

If the criteria are no longer met, the asset is removed from held for sale and measured at the lower of (a) the amount it would have been carried at had it never been classified as held for sale (adjusted for depreciation or revaluation it would have had) and (b) its recoverable amount at the date of the decision not to sell.

The adjustment goes to profit or loss from continuing operations. The facts and effect on results are disclosed.

Presentation and disclosure

• Held-for-sale assets are shown separately from other assets in the statement of financial position, as current. The assets and liabilities of a disposal group are shown separately and not offset, with the major classes shown on the face or in the notes.
• Comparatives in the statement of financial position are not restated.
• A gain or loss on remeasurement that is not a discontinued operation goes in profit or loss from continuing operations and is disclosed.
• Notes describe the asset or group, the facts and circumstances, the expected manner and timing of disposal and the segment in which it sits.

Discontinued operations

Information on discontinued operations helps users predict future results, because closing or selling a major part of the business changes the future of the entity.

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

1. represents a separate major line of business or geographical area of operations; or
2. is part of a single co-ordinated plan to dispose of such a line or area; or
3. is a subsidiary acquired exclusively with a view to resale.

The disposal of a single asset is not a discontinued operation unless it is a component. The operation must meet the criteria at the reporting date: shutting a line in July for a June year end does not make it discontinued in the June statements.

Presentation

• A single amount on the face of profit or loss: the post-tax profit or loss of discontinued operations plus the post-tax gain or loss on remeasurement to fair value less costs to sell or on disposal.
• An analysis of that amount (revenue, expenses, pre-tax result, tax, and the gain or loss and its tax), on the face in a separate section or in the notes.
• The net cash flows from operating, investing and financing activities of discontinued operations, on the face of the cash flow statement or in the notes.
• Comparatives in profit or loss are restated so that the disclosures cover all operations discontinued by the reporting date. Adjustments to amounts from a prior disposal (such as price adjustments or retained obligations) are shown separately within discontinued operations.

Under IFRS 18 from 2027, discontinued operations is one of the five categories of profit or loss.

Areas of judgement

• Whether the held-for-sale criteria are met, which involves several judgements (commitment, price, probability, timing).
• Whether a disposal is a discontinued operation.

The rules in more depth

Why no depreciation

The asset will be recovered through sale proceeds, not through use, so spreading its cost over future use no longer reflects what is happening.

Why no gain on classification

A gain is recognised only when the asset is actually sold. Writing up an unsold asset would anticipate the profit. But losses are recognised at once, which is the prudence principle.

Why the price must be reasonable

A company can always say it is “for sale” by asking a price nobody will pay. The test of a reasonable price keeps the label honest.

Why comparatives differ

The statement of financial position shows last year as reported, so users see what was classified as what at that date. Profit or loss is restated so that the trend of continuing operations is comparable.

Effect on ratios

Continuing profit and earnings per share from continuing operations show the future business better. Earnings before interest, tax, depreciation and amortisation trends are cleaner when the discontinued business is removed. Held-for-sale assets are current, which can change liquidity ratios.

Worked examples

1. Carrying amount.
   ₦80,000 − 4 × ₦10,000 = ₦40,000.
2. Fair value less costs to sell.
   ₦50,000 − ₦1,000 = ₦49,000, which is above carrying amount.
   No write-down and no gain. It stays at ₦40,000 and is not depreciated.
3. On sale.
   gain = ₦48,000 − ₦40,000 = ₦8,000.

1. Impairment loss.
   ₦20m − ₦12m = ₦8m.
2. ₦5m is charged to other comprehensive income (against the surplus).
3. ₦3m is charged to profit or loss.

1. Carrying amount at 31 December 2023 = ₦10m − ₦2m − ₦0.7m = ₦7.3m.
   Depreciation to 1 May 2024 = ₦7.3m ÷ 8 × 4/12 ≈ ₦0.304m (about ₦0.30m).
   Carrying amount at 1 May = ₦7.0m.
2. Classified as held for sale: lower of ₦7.0m and ₦6.8m. Write-down = ₦0.2m in profit or loss. Depreciation stops.
3. At 1 July 2024: fair value less costs to sell ₦7.04m, a rise of ₦0.24m.
   Cumulative impairment so far = ₦0.7m + ₦0.2m = ₦0.9m, so the gain of ₦0.24m is recognised.
   Carried at ₦7.04m.
4. At 31 December 2024: fair value less costs to sell ₦7.9m, a rise of ₦0.86m.
   Unreversed cumulative impairment = ₦0.9m − ₦0.24m = ₦0.66m, so only ₦0.66m is recognised.
   Carried at ₦7.7m.
5. On sale at ₦8m: gain = ₦8.0m − ₦7.7m = ₦0.3m.

Note: the Pathfinder solution is slightly different from ours here. It states the gain on sale as ₦30,000, but its own carrying amount of ₦7.7 million and proceeds of ₦8 million give ₦300,000, so we use ₦300,000. In the exam, show the full workings (carrying amount ₦7.7 million, proceeds ₦8 million) and state the gain as ₦300,000. The marker can then see where each figure comes from.

1. Loss = ₦200m − ₦150m = ₦50m.
2. Goodwill takes ₦20m, reducing it to nil.
3. The remaining ₦30m goes to the other assets in scope. Inventory and financial assets are out of scope, so property, plant and equipment takes all ₦30m and falls to ₦70m.

1. Profit for the period.
   ₦600,000 + ₦250,000 = ₦850,000.
2. The ₦250,000 is a single line, analysed in the notes into revenue, expenses, pre-tax result, tax and the gain or loss on measurement.
3. The prior year’s profit or loss is restated to show the same split. The prior year’s statement of financial position is not restated.

How to score full marks

• Test the three criteria at the reporting date: available now, highly probable (with the reasonable price test), within a year. State the answer for each.
• Ignore events after the year end when deciding classification.
• Measure at the lower figure. Show the write-down or say there is none. Say that depreciation stops.
• For later changes, cap any gain at the cumulative impairment loss.
• For disposal groups, allocate goodwill first, then pro rata to in-scope assets only.
• For discontinued operations, check the component test and major line or area, then give the single-amount presentation and restated comparatives.

Common mistakes in the exam

• Classifying an asset as held for sale because it was sold after the year end.
• Recognising a gain on reclassification when fair value less costs to sell is higher.
• Continuing to depreciate a held-for-sale asset.
• Calling an abandoned asset or a single asset sale a discontinued operation.
• Writing a later gain above the cumulative impairment loss.
• Allocating a disposal group loss to inventory or financial assets.
• Restating the comparative statement of financial position.
• Including the gain on disposal in revenue.

Quick revision

• Held for sale: available now, highly probable (committed, marketed, reasonable price), within a year. Tested at the reporting date.
• Measure at the lower of carrying amount and fair value less costs to sell. No depreciation. No gain on classification.
• Gain after impairment: only up to the cumulative impairment.
• Disposal group loss: goodwill first, then in-scope assets pro rata.
• Abandonment is not held for sale. Change of plan: lower of the never-classified amount and recoverable amount.
• Discontinued operation: component, major line or area, held for sale or disposed. Single amount, analysis, restated profit or loss comparatives, no restatement of the statement of financial position.
• CAMA 2020: ss. 377(1), 378, 374(1), 379 to 381, 404(7).

Practice questions

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.

Recall check: multiple choice

The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.

Written questions

Model answers

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