NON-CURRENT ASSETS HELD FOR SALE

NON-CURRENT NON-CURRENT ASSETSASSETS

HELD FOR SALEHELD FOR SALE

- the why and the- the why and thewhereforewherefore

NON-CURRENT ASSETS HELD FOR SALENON-CURRENT ASSETS HELD FOR SALE

Revenue for the sale of goods can only be recognised if …….

• the entity has transferred … ownership … AND

• the entity retains neither … managerial involvement … nor effective control … AND

• the amount of revenue can be measured reliably … AND

• it is probable the [amount will be received] … AND

• the costs … can be measured reliably

ALL MUST BE SATISFIEDALL MUST BE SATISFIED

AASB 118.14AASB 118.14


But what if an entity knows that it will dispose of an asset in the next period,

but it doesn’t yet meet the requirements of AASB 118?

If it can’t recognise the revenue, it can’t recognise the costs -

- unless another Standard applies


Financial Instruments AASB 139 FAIR VALUE

Other Receivables AASB 136 Provision for Impairment (Allowance for Doubtful Debts)

Inventories AASB 102 Lower of cost or net realisable value

Investment Property AASB 140 FAIR VALUE

Other Non-current Assets

(including Discontinued Operations)

AASB 5


15 An entity shall measure a non-current

asset (or disposal group) classified as held

for sale at the lower of its carrying

amount and fair value less costs to sell.

Thus AASB 5 requires early Thus AASB 5 requires early recognition of losses, but does recognition of losses, but does not permit early recognition of not permit early recognition of profits.profits.


Accounting entries:

DR Non-Current Assets held for saleDR Accumulated DepreciationDR (Anticipated) Loss on disposal

CR Infrastructure, Property, Plant & Equipment

At lower of cost andnet realisable value

Carrying value

Carrying value Separately

shown in P&LFrom the date of transfer

• NO MORE DEPRECIATION

• NO MORE REVALUATIONS

The asset is literally removed from your Asset Register, and recorded separately.


For AASB 5 to apply, you must be For AASB 5 to apply, you must be able to make a realistic estimate of able to make a realistic estimate of the sale proceeds.the sale proceeds.

6 An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. 7 For this to be the case, the asset (or 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 (or disposal groups) and its sale must be highly probable.

The emphasis is in the Standard


8 For the sale to be highly probable,

• the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and

• Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value.

• an active program to locate a buyer and complete the plan must have been initiated.

• In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, ...


Mere Council resolution Mere Council resolution that it intends to sell is that it intends to sell is

NOT ENOUGH.NOT ENOUGH.

In practical terms, you need an enforceable contract for sale

by the time of audit.

If in doubt, discuss it with your Auditor early.


Technically, AASB 5 also applies to the trade-in of plant, etc.

10 Sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance in accordance with AASB 116 Property, Plant and Equipment.

However, provided the loss on disposal is NOT MATERIAL, your Auditor will usually accept this being managed through your Plant Register, and certainly it is more convenient to do so.


DISCLOSURESDISCLOSURES

There are plenty -

and, because every such sale is different,

the Model Statements cannot provide comprehensive examples.

Refer to AASB 5 paragraphs 30 - 42


GOOD DISCLOSUREGOOD DISCLOSURE


GOODNESS GRACIOUS!!GOODNESS GRACIOUS!!


If you haven’t got any, DON’T SHOWDON’T SHOW

• the subtotal in current assets, or the empty line item

• the subtotal in current liabilities, or liabilities relating to non-current assets held for sale

• anything for discontinued operations in P&L


It has been in the Model Statements:

Page 9

and pages 124, 125, 126.

The explanations contained in the Model Statements are as important as the presentation examples.

NON-CURRENT NON-CURRENT ASSETSASSETS

HELD FOR SALEHELD FOR SALE

- the why and the- the why and thewhereforewherefore

NON-CURRENT ASSETS HELD FOR SALE

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