Financial Reporting · Reporting financial performance

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Updated 11 October 2026 · Fact-checked

IFRS 5 applies when an asset's carrying amount will be recovered mainly through sale, not use. You classify it as held for sale, stop depreciating it, and measure it at the lower of carrying amount and fair value less costs to sell. A discontinued operation is shown separately in profit or loss.

Understand IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Most non-current assets earn their return by being used. Some earn it by being sold. IFRS 5 deals with the second case. It makes the financial statements show clearly what the entity is about to lose, and it stops the entity carrying those assets at more than it will get for them.

An asset (or a disposal group) is held for sale when its carrying amount will be recovered principally through a sale, not continuing use. Two main conditions must both be met. First, the asset must be available for immediate sale in its present condition. Second, the sale must be highly probable. That means management is committed to a plan, an active programme to find a buyer has started, the asset is marketed at a price reasonable in relation to its fair value, the sale is expected to complete within one year of classification, and it is unlikely the plan will change or be withdrawn. A delay beyond one year is allowed only when it is caused by events outside the entity's control and the entity is still committed to the plan.

Once classified, the asset is measured at the lower of carrying amount and fair value less costs to sell. Depreciation stops from the date of classification. Any write-down is an impairment loss recognised in profit or loss. If the asset was carried at a revalued amount, any earlier revaluation is dealt with under IAS 16 up to the classification date. The write-down that then arises from the costs to sell is an impairment loss recognised in profit or loss. The asset is shown separately in current assets, and any related liabilities are shown separately in current liabilities. You do not offset them. Comparatives in the statement of financial position are not restated.

A component of an entity has operations and cash flows that can be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the entity. While it is held for use, it is a cash-generating unit or a group of cash-generating units.

A discontinued operation is a component that has been disposed of or is classified as 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 such a line or area, or is a subsidiary acquired exclusively with a view to resale. These tests apply only if the component has been disposed of or is held for sale. A subsidiary bought for resale therefore qualifies only once it is also disposed of or held for sale.

The key difference: held for sale is a classification for assets. A discontinued operation is a presentation for results. A discontinued operation does not have to be held for sale at the reporting date if it has already been disposed of during the year. Many held-for-sale assets, such as a single surplus building, are not discontinued operations. In profit or loss you show a single amount after tax for the discontinued operation, made up of its post-tax profit or loss plus the post-tax gain or loss on remeasurement or disposal. Comparatives in profit or loss are re-presented.

Key rules to remember

Measurement on classification: Held for sale amount = lower of (carrying amount, fair value less costs to sell); Remeasure immediately before classification under the relevant standard first, then apply this test.
Impairment loss on classification: Impairment loss = carrying amount − fair value less costs to sell (if positive); Recognise in profit or loss. If the asset is revalued, first revalue it under IAS 16 up to the classification date. The write-down that arises from the costs to sell is then an impairment loss in profit or loss.
Depreciation: Depreciation after classification = nil; Stops from the date the asset meets the held-for-sale criteria, even if it is still in use.
Subsequent gains: Later gain recognised up to cumulative impairment losses previously recognised; A gain above the original carrying amount is not recognised until the sale.
Discontinued operation single line: Post-tax profit or loss of operation + post-tax gain or loss on remeasurement or disposal; Shown as one amount on the face of the statement of profit or loss, with analysis in the notes or face.
Time limit: Sale expected to complete within 12 months of classification; Extension allowed only for events beyond the entity's control while it stays committed.

How to solve IFRS 5 Non-current Assets Held for Sale and Discontinued Operations questions

Use this order for any IFRS 5 question, whether it asks for journals, extracts or an explanation.

1Test the criteria: available for immediate sale in present condition, and sale highly probable (committed plan, active marketing, reasonable price, within one year). If not met, keep normal accounting and depreciation.
2Update the carrying amount to the date of classification. Charge depreciation up to that date only.
3Work out fair value less costs to sell. Deduct selling costs from the expected price.
4Compare the two figures. Carry the asset at the lower. Any shortfall is an impairment loss in profit or loss.
5Reclassify the asset (and any related liabilities) to separate current lines. Do not depreciate it from now on.
6Decide if it is a discontinued operation: separate major line or geographical area, or a subsidiary bought for resale, and disposed of or held for sale.
7If discontinued, present one post-tax line on the face of profit or loss, with revenue, expenses and tax analysed in the notes, and re-present comparatives.

Quickest way: Three-check shortcut

When to use it: Use in Section A and Section B objective questions where you need an answer in about a minute.

Check one: are both criteria met at the reporting date? If not, no reclassification and depreciation continues.
Check two: carrying amount (after depreciation to the classification date) versus price less costs. Pick the lower.
Check three: is a whole major line or area involved? If yes, it also goes in the discontinued line. If it is one asset, it does not.

Common mistakes in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Continuing to depreciate an asset after it is classified as held for sale.
Students see the asset is still in use and assume the usual rule applies.
Fix: Depreciation stops on classification. Only depreciate up to that date.
Using fair value instead of fair value less costs to sell.
The costs are mentioned briefly in the question and get ignored.
Fix: Always deduct costs of disposal from the price before comparing with carrying amount.
Treating every held-for-sale asset as a discontinued operation.
The two ideas appear in the same standard and sound similar.
Fix: Ask whether a separate major line of business or geographical area is involved. A single asset or minor part is not.
Offsetting liabilities of a disposal group against its assets.
Students want to show a single net figure.
Fix: Show assets held for sale and liabilities directly associated with them as separate lines.
Restating the prior-year statement of financial position.
Students know comparatives are restated for discontinued operations in profit or loss and apply it everywhere.
Fix: Only the profit or loss comparatives are re-presented. The prior-year statement of financial position stays as reported.
Reclassifying because management has only 'thought about' selling.
The criteria are read loosely.
Fix: Look for a committed plan, active marketing at a reasonable price and a sale expected within one year.

Worked examples

Example 1

On 1 October 20X5 Hale Co classified a building as held for sale. It cost ₹80,00,000 on 1 April 20X1 with a useful life of 20 years and no residual value, and is carried at cost less depreciation. Its year end is 31 December 20X5. Fair value is ₹61,50,000 and expected selling costs are ₹1,00,000. Calculate the amounts to be recognised for the year ended 31 December 20X5.

Show the solution

Annual depreciation = ₹80,00,000 ÷ 20 = ₹4,00,000.
Depreciation to 31 December 20X4 covers 1 April 20X1 to 31 December 20X4, which is 3.75 years: ₹4,00,000 × 3.75 = ₹15,00,000. Carrying amount at 1 January 20X5 = ₹65,00,000.
Depreciation for 1 January to 30 September 20X5 = ₹4,00,000 × 9/12 = ₹3,00,000. Carrying amount at classification = ₹62,00,000.
Fair value less costs to sell = ₹61,50,000 − ₹1,00,000 = ₹60,50,000.
Lower of ₹62,00,000 and ₹60,50,000 is ₹60,50,000. Impairment loss = ₹62,00,000 − ₹60,50,000 = ₹1,50,000 in profit or loss.
No depreciation is charged from 1 October 20X5.

Answer: Depreciation of ₹3,00,000 is charged for 1 January to 30 September 20X5, and an impairment loss of ₹1,50,000 is recognised in profit or loss. The building is shown at ₹60,50,000 as a non-current asset held for sale in current assets.

Example 2

Delta Co decided to sell its entire Southern division, a separate major geographical area, and met the held-for-sale criteria at 31 March 20X6. For the year the division had revenue of ₹50,00,000, expenses of ₹58,00,000 and tax relief on the loss of ₹2,00,000. On classification the division's net assets were written down by ₹3,00,000 to fair value less costs to sell, with no tax effect. Show how the division is presented in the statement of profit or loss.

Show the solution

Confirm it is a discontinued operation: it is a separate major geographical area and is classified as held for sale at the year end.
Pre-tax loss of the division = ₹50,00,000 − ₹58,00,000 = ₹(8,00,000).
Post-tax operating loss = ₹(8,00,000) + ₹2,00,000 tax relief = ₹(6,00,000).
Add the post-tax remeasurement loss of ₹(3,00,000): total = ₹(9,00,000).
Exclude the division's revenue and expenses from the continuing lines. Present one line after continuing profit.
Analyse revenue, expenses, tax and the remeasurement loss in the notes or on the face, and re-present the prior-year figures on the same basis.

Answer: Show 'Loss for the year from discontinued operations' of ₹(9,00,000) as one line. The division's assets and related liabilities are shown separately in current assets and current liabilities.

Exam tips

In Section C, state the criteria met before calculating. Marks are given for the reasoning, not only the number.
Always calculate depreciation up to the classification date first. Many questions hide a stub period.
In objective questions, watch for traps: the sale is expected in more than a year, the asset is not available in its present condition, or the price is quoted before costs.
When drafting extracts, label the discontinued line clearly and keep it separate from continuing operations. Show comparatives re-presented in profit or loss only.
Write a short explanation when asked to distinguish the two concepts: held for sale is about the asset, discontinued is about a major component's results.

Practice questions from Reporting financial performance

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: frequently asked questions

What are the IFRS 5 held for sale criteria?

The asset must be available for immediate sale in its present condition and the sale must be highly probable. That needs a committed plan, active marketing at a reasonable price, and an expected sale within one year, subject to limited exceptions outside the entity's control.

What is the difference between held for sale and a discontinued operation?

Held for sale is a classification and measurement rule for assets or disposal groups. A discontinued operation is a component, such as a major line of business or geographical area, that has been disposed of or is held for sale, and its results are presented separately in profit or loss.

Does depreciation stop for assets held for sale?

Yes. Depreciation stops from the date the asset is classified as held for sale. Charge depreciation up to that date, then carry the asset at the lower of carrying amount and fair value less costs to sell.

Can an asset be reclassified back from held for sale?

Yes, if the criteria are no longer met. You measure it at the lower of its carrying amount before classification, adjusted for depreciation it would have had, and its recoverable amount at the date of the decision not to sell.