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The Interpretations Committee tentatively decided not to take the medium- to longer-term IFRS 5-related issues to its agenda

 08 September 2015


The Interpretations Committee has received and discussed a number of issues relating to the application of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations requirements over a number of its meetings. Those issues relate to various aspects of the IFRS 5 requirements and include the following:

Scope

  • the scope of the held-for-sale classification—paragraph 6 of IFRS 5 requires a non-current asset (or disposal group) to be classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The issue relates to whether certain types of planned loss of control events, besides loss of control through sale or distribution, can result in a held-for-sale classification, such as loss of control of a subsidiary due to dilution of the shares held by the entity, call options held by a non-controlling shareholder or a modification of a shareholders’ agreement. Should planned loss of control events in any of these circumstances fall within the scope of IFRS 5?
  • accounting for a disposal group consisting mainly of financial instruments—paragraph 5 of IFRS 5 exempts from the measurement requirements of IFRS 5, among other things, financial assets within the scope of IFRS 9 Financial Instruments. The issue relates to whether IFRS 5 applies to a disposal group that consists mainly, or entirely, of financial instruments. Should such a disposal group be within the scope of IFRS 5 in terms of the classification and/or measurement requirements of IFRS 5?

Measurement

  • impairment of a disposal group—paragraph 15 of IFRS 5 requires a disposal group to be measured at the lower of its carrying amount and its fair value less costs to sell, whereas paragraph 23 requires the impairment loss recognised for a disposal group to be allocated to the carrying amount of the non-current assets that are within the scope of the measurement requirements of IFRS 5. The issue relates to a situation in which the difference between the carrying amount and the fair value less costs to sell of a disposal group exceeds the carrying amount of non-current assets in the disposal group. Should the amount of impairment losses be limited to the carrying amount of:
  1. non-current assets that are within the scope of the measurement requirements of IFRS 5;
  2. the net assets of a disposal group;
  3. the total assets of a disposal group; or
  4. the non-current assets and recognise a liability for the excess, if any?
  • reversal of an impairment loss relating to goodwill in a disposal group—paragraph 22 of IFRS 5 requires the recognition of a gain for a subsequent increase in fair value less costs to sell of a disposal group. The issue relates to a situation in which goodwill that is included in the disposal group has previously been impaired. Specifically, the question focuses on whether an impairment loss previously allocated to goodwill can be reversed. Should the allocation of all or part of a previous impairment loss to goodwill limit the amount of impairment reversal that can be recognised against other assets in the disposal group?

Presentation

  • how to apply the definition of ‘major line of business’ in presenting discontinued operations—in accordance with paragraph 32 of IFRS 5, if a component of an entity has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations, it is a discontinued operation. The issue is how to interpret the definition of ‘discontinued operation’, especially with regard to the notion of ‘separate major line of business or geographical area of operations’ as described in paragraph 32 of IFRS 5.
  • how to apply the presentation requirements in paragraph 28 of IFRS 5—paragraph 28 requires the effects of a remeasurement (upon ceasing to be classified as held for sale) of a disposal group that is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate, to be recognised retrospectively, whereas it requires the effects of such a remeasurement of non-current assets to be recognised in the current period. The issue relates to a situation in which there has been a change to a plan to dispose of a disposal group that consists of both a subsidiary and other non-current assets, and that such a change results in the disposal group no longer being classified as held for sale. In such a situation, should the remeasurement adjustments relating to the subsidiary and the other non-current assets be recognised in different accounting periods, and should any retrospective amendment apply to presentation as well as to measurement?

The Interpretations Committee noted that the IASB has recently published a Request for Views 2015 Agenda Consultation to gather views on the strategic direction and the balance of the work plan of the IASB, and that IFRS 5 was described as a possible research project in that document. The Interpretations Committee concluded that it was better to wait until the 2015 Agenda Consultation is completed before further discussing any of these issues.

Consequently, the Interpretations Committee [decided] not to add these issues to its agenda.



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