IFRS 5 assets held for sale and discontinued operations

When is an asset held for sale?

The sale is highly probable when management at the appropriate level is committed to a plan to sell, an active programme to locate a buyer has started, the asset is actively marketed at a price reasonable in relation to its fair value, the sale is expected to qualify for recognition as completed within one year, and significant changes to the plan or its withdrawal are unlikely. The one-year period can be extended for events beyond the company's control, such as regulatory approval, if it remains committed to the sale. Assets to be abandoned are not held for sale, although an abandoned component can be a discontinued operation. The same rules apply to assets held for distribution to owners.

How are held for sale assets measured?

Immediately before classification, the assets and liabilities are measured under their own standards. The disposal group is then measured at the lower of its carrying amount and fair value less costs to sell, with any impairment loss allocated to the non-current assets within the scope of IFRS 5's measurement rules, goodwill first. Inventories, financial assets, deferred tax assets and some other items stay within their own standards. Depreciation and amortisation stop once an asset is classified as held for sale. Later increases in fair value less costs to sell are recognised as gains, but only up to the losses previously recognised. See IAS 36 impairment and IFRS 13 fair value.

IFRS 5 in practice: a division held for sale

In November 2026 a group's board approves the sale of its packaging division, a separate major line of business. A buyer search is under way and completion is expected by mid-2027. At 31 December the division's net assets, measured under their own standards, are CU 1,000 million, and its fair value less costs to sell is CU 880 million. All figures are in CU million.

The CU 120 million write-down goes first against goodwill, then against property, plant and equipment; inventories and receivables are outside the measurement scope. The assets of CU 1,130 million and liabilities of CU 250 million are shown on separate lines in the balance sheet, without restating last year's balance sheet. The division is a discontinued operation, so its profit after tax for 2026 of CU 60 million and the write-down are combined into one amount, a loss of CU 60 million, below profit from continuing operations, and the 2025 income statement is re-presented the same way.

What is a discontinued operation?

A component of the company, with operations and cash flows that can be clearly distinguished, that has been disposed of or is held for sale and that represents a separate major line of business or geographical area of operations, is part of a single plan to dispose of one, or is a subsidiary acquired exclusively for resale. Its post-tax profit or loss and the post-tax gain or loss on remeasurement or disposal are presented as a single amount, analysed in the notes, with its net cash flows from operating, investing and financing activities disclosed. From 2027, IFRS 18 presents these amounts in a separate discontinued operations category of the income statement. See IFRS 18 income statement categories.

What if the plan changes?

If the criteria are no longer met, the asset stops being held for sale and is measured at the lower of its carrying amount before classification, adjusted for the depreciation and revaluations that would have been recognised, and its recoverable amount at the date it is reclassified. The adjustment goes to profit or loss from continuing operations. Results of a component no longer held for sale are moved back into continuing operations for all periods presented.

How does IFRS 5 compare with US GAAP?

The held for sale criteria under ASC 360 are very similar. The discontinued operations test differs: under ASC 205-20, a disposal is a discontinued operation if it represents a strategic shift that has, or will have, a major effect on the company's operations and financial results, which is close to, but not the same as, IFRS 5's separate major line of business or geographical area. See ASC 360 impairment and IFRS vs US GAAP key differences.

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