IFRS 5 vs ASC 205-20: discontinued operations

Selling a division changes how the whole set of financial statements looks: its results move to one line, its assets to another, and investors are told what is left. IFRS 5 and US GAAP reach similar answers, but not always for the same disposals and not with the same comparatives. This guide compares IFRS 5 with ASC 205-20 and ASC 360 side by side, reworks the IFRS 5 guide's division under US GAAP, and covers spin-offs, equity method investments, reclassification back to held and used, and disclosures.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Updated . 7 minute read.

Short answer

IFRS 5 vs ASC 205-20 compares how the two frameworks handle businesses and assets that are being sold. The held for sale criteria are almost the same: the asset or disposal group must be available for immediate sale in its present condition and the sale must be highly probable, or probable under ASC 360, within one year. Both then measure it at the lower of its carrying amount and fair value less costs to sell, stop depreciation and present it separately. The tests for a discontinued operation differ: IFRS 5 looks for a separate major line of business or geographical area, while ASC 205-20 looks for a strategic shift that has, or will have, a major effect on operations and financial results. US GAAP re-presents the prior-year balance sheet for discontinued operations; IFRS does not. IFRS also applies held for sale accounting to assets held for distribution to owners and to equity method investments, while US GAAP keeps depreciating assets awaiting a spin-off and keeps applying the equity method until a sale. In this guide's example, a division's CU 1,220 million of assets moves into a separate line in the prior-year US GAAP balance sheet but stays in the ordinary lines under IFRS.

At a glance

Held for sale test
Nearly identical
Discontinued
Different tests
Prior balance sheet
Re-presented in US
Spin-offs
Held for sale in IFRS
Equity investees
IFRS 5 applies
Later gains
Wider cap under IFRS
IFRS 5 vs ASC 205-20: discontinued operationsHeld for sale test: Nearly identical; Discontinued: Different tests; Prior balance sheet: Re-presented in US; Spin-offs: Held for sale in IFRS; Equity investees: IFRS 5 applies; Later gains: Wider cap under IFRS.KEY FACTS AT A GLANCEIFRS 5 vs ASC 205-20: discontinued operationsHeld for sale testNearly identicalDiscontinuedDifferent testsPrior balance sheetRe-presented in USSpin-offsHeld for sale in IFRSEquity investeesIFRS 5 appliesLater gainsWider cap under IFRSTax BakersIFRS 5 vs ASC 205-20: discontinued operationsHeld for sale test: Nearly identical; Discontinued: Different tests; Prior balance sheet: Re-presented in US; Spin-offs: Held for sale in IFRS; Equity investees: IFRS 5 applies; Later gains: Wider cap under IFRS.KEY FACTS AT A GLANCEIFRS 5 vs ASC 205-20: discontinuedoperationsHeld for sale testNearly identicalDiscontinuedDifferent testsPrior balance sheetRe-presented in USSpin-offsHeld for sale in IFRSEquity investeesIFRS 5 appliesLater gainsWider cap under IFRSTax Bakers
Key facts at a glance, as set out in this guide.

What do IFRS 5 and US GAAP have in common?

Held for sale classification under IFRS 5 and ASC 360 needs a committed plan, an active program to find a buyer, a reasonable price, availability for immediate sale and an expected sale within one year, with limited exceptions for delays outside the company's control. Both measure held for sale items at the lower of carrying amount and fair value less costs to sell, stop depreciating them, present them separately in the balance sheet, and show a discontinued operation's results, net of tax, as a single amount below continuing operations, with comparatives in the income statement re-presented and EPS for continuing operations shown separately. See IFRS 5 held for sale.

IFRS 5 vs ASC 205-20: what are the differences?

IFRS 5 vs ASC 205-20 at a glanceIFRS 5 vs ASC 205-20 at a glanceTOPICIFRSUS GAAPRe-present prior balance sheetNot allowedRequiredHeld for sale for a spin-offRequiredNot allowedDepreciate until a spin-offNot allowedRequiredEquity investee held for saleRequiredNot allowedStrategic shift testNot requiredRequired
Same held for sale test; different discontinued operations and comparatives.
AreaIFRS 5ASC 205-20 and ASC 360
What is a discontinued operation?A component that is a separate major line of business or geographical area, part of a single plan to dispose of one, or a subsidiary bought only to resellA component whose disposal is a strategic shift with a major effect on operations and results, such as a major line of business, geographical area or equity method investment, or a business held for sale when acquired
Prior-year balance sheetNot re-presentedAssets and liabilities of a discontinued operation re-presented separately for all periods
Assets held for distribution to owners, such as a spin-offClassified as held for distribution, measured at the lower of carrying amount and fair value less costs to distribute, not depreciatedHeld and used until distributed, so depreciation continues
Equity method investments to be soldHeld for sale, and the equity method stopsOutside the held for sale model; the equity method continues until the sale
Gains when fair value later risesUp to cumulative impairment losses, including IAS 36 losses recognized before the classificationUp to losses recognized under the held for sale guidance only
Back to held and usedLower of the adjusted carrying amount and recoverable amountLower of the adjusted carrying amount and fair value
Cash flows of a discontinued operationNet cash flows from operating, investing and financing activitiesEither total operating and investing cash flows, or depreciation, capital expenditure and significant noncash items
Other disclosuresNo specific requirementContinuing involvement with a discontinued operation, and disposals of individually significant components that are not discontinued operations

An example: the IFRS 5 division under US GAAP

In the IFRS 5 guide, a company classifies a division as held for sale: property, plant and equipment of CU 900 million, goodwill of 100, inventory of 150 and receivables of 100, less liabilities of 250, a carrying amount of CU 1,000 million against fair value less costs to sell of CU 880 million. The division is a major line of business, so it is a discontinued operation under both frameworks. At the previous year end its assets were CU 1,220 million and its liabilities CU 240 million. All figures are in CU million.

ItemIFRS 5US GAAP
Loss on classification120: goodwill 100, then property, plant and equipment 20120, recognized on the disposal group
Current year end: assets and liabilities held for sale1,130 and 2501,130 and 250
Previous year end, as shown in the comparativesLeft in the ordinary linesAssets of discontinued operations 1,220; liabilities 240
If it were a spin-off instead: depreciation for the 6 months beforeNone45

The income statement looks the same under both: the division's results for both years in one line, net of tax. The balance sheets differ, because the US GAAP comparatives are restated to isolate the division and the IFRS comparatives are not. Had the division been a smaller business, such as one of several regional brands, it might have been a discontinued operation under IFRS 5 as a separate geographical area, but not under US GAAP if its sale is not a strategic shift with a major effect, or the other way round.

Does IFRS 18 change discontinued operations?

No. From 2027, IFRS 18 classifies income and expenses into operating, investing and financing categories, but discontinued operations stay outside them, in their own line. See the IFRS 18 income statement categories and ASC 360 impairment for the US held for sale rules.

Where to go next

See IFRS vs US GAAP key differences and IFRS 3 vs ASC 805.

Keep going

Our free Excel models work through the examples in these guides, and the comparisons show where IFRS and US GAAP part ways. Every guide names the Chartered Accountant who wrote it and the one who reviewed it.

All IFRS vs US GAAP guides Free Excel models

Questions people ask

What is the difference between IFRS 5 and ASC 205-20?

The held for sale rules are nearly identical, but a discontinued operation is a separate major line of business or geographical area under IFRS 5 and a strategic shift with a major effect under ASC 205-20, and US GAAP re-presents the prior-year balance sheet while IFRS does not.

Is the prior-year balance sheet restated for a discontinued operation?

Under US GAAP, yes: the assets and liabilities of the discontinued operation are shown separately for all periods presented. Under IFRS 5, no.

Are assets awaiting a spin-off held for sale?

Under IFRS 5, they are classified as held for distribution to owners and not depreciated; under US GAAP, they remain held and used, and depreciated, until the spin-off.

What is a strategic shift under ASC 205-20?

A disposal that has, or will have, a major effect on a company's operations and financial results, such as the sale of a major line of business, a major geographical area or a major equity method investment.

Sources

The standards, updates and other documents this guide draws on.

  1. IFRS Foundation: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
  2. FASB Accounting Standards Codification: Subtopic 205-20, Discontinued Operations
  3. FASB Accounting Standards Codification: Topic 360, Property, Plant, and Equipment
  4. KPMG US: Assets held for sale and discontinued operations, IFRS Accounting Standards compared to US GAAP

Rules and fees change. If you are reading this long after October 26, 2026, confirm the figures with the source before you rely on them.

IFRS 5IFRS 5 assets held for sale and discontinued operationsASC 350Impairment of long-lived assets under ASC 360Accounting standardsIFRS vs US GAAP: the key differences in one guide

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This guide is general information. It is not tax or legal advice for your situation.