Financial Reporting · Tangible non-current assets
IFRS 5 Non-Current Assets Held for Sale: Criteria and Measurement
Updated 11 October 2026 · Fact-checked
IFRS 5 applies when an asset's carrying amount will be recovered mainly through sale, not use. Classify it as held for sale if it is available now, the sale is highly probable and within a year. Measure it at the lower of carrying amount and fair value less costs to sell, and stop depreciating it.
Understand IFRS 5 Non-Current Assets Held for Sale
Most non-current assets earn their value by being used. Some are about to be sold instead. IFRS 5 tells you when to treat an asset as sold in substance, so the financial statements show users that its value will come from a sale.
An asset (or disposal group) is classified as held for sale when its carrying amount will be recovered principally through a sale transaction. Two tests apply. It must be available for immediate sale in its present condition. The sale must be highly probable. Highly probable means management is committed to a plan, an active programme to find a buyer has started, the asset is marketed at a reasonable price compared with 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the sale is expected to complete within one year of classification, and it is unlikely the plan will change or be withdrawn.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 longer delay is allowed only when it is outside the entity's control and the entity remains committed to the plan.
Once classified, you measure the asset at the lower of carrying amount and fair value less costs to sell. Any write-down is an impairment loss in profit or loss. You stop depreciating the asset from the date of classification. The asset is shown separately in current assets, and any related liabilities of a disposal group are shown separately in current liabilities. Assets held for sale are not netted off against liabilities.
A discontinued operation is a component of the entity 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, or is part of a single plan to dispose of one, or is a subsidiary acquired only for resale. On the face of the statement of profit or loss, you show a single amount: the post-tax profit or loss of the discontinued operation plus the post-tax gain or loss on remeasurement or disposal. Notes give the analysis, and comparatives are restated.
Key rules to remember
- Measurement on classification
- Held for sale amount = lower of (carrying amount, fair value less costs to sell)
- Measure just before classification under the relevant standard first (including depreciation up to that date), then compare.
- Impairment loss on classification
- Loss = carrying amount − fair value less costs to sell (if positive)
- Charge to profit or loss. If the asset was revalued, treat the loss as a revaluation decrease, and the revaluation surplus is absorbed first.
- Fair value less costs to sell
- Fair value − incremental selling costs
- Costs to sell are only those directly attributable to the sale, such as legal fees and agent commission.
- Held-for-sale criteria
- Available for immediate sale + sale highly probable + expected within 12 months
- All conditions must be met at the reporting date to classify the asset as held for sale.
- Depreciation
- No depreciation after classification as held for sale
- Depreciate up to the date of classification, then stop, even if the asset is still in use.
- Discontinued operation on the face of profit or loss
- Post-tax profit or loss of the operation + post-tax gain or loss on remeasurement or disposal
- Shown as one line below profit from continuing operations.
How to solve IFRS 5 Non-Current Assets Held for Sale questions
Use this order for any IFRS 5 question, whether it is a multiple-choice question or a written question.
- 1Read the facts and test the criteria: is the asset available now, is a sale highly probable, and is completion expected within a year? If any answer is no, it stays as a normal non-current asset.
- 2Check the date. The criteria must be met by the reporting date. A plan agreed after the year end is a non-adjusting event, not a held-for-sale classification.
- 3Bring depreciation up to the date of classification and work out the carrying amount at that date.
- 4Calculate fair value less costs to sell: fair value minus selling costs only.
- 5Compare the two figures and take the lower. Any shortfall is an impairment loss in profit or loss (or against a revaluation surplus first if revalued).
- 6Stop depreciation from classification. Present the asset on its own line in current assets.
- 7If a discontinued operation is involved, test the definition, then show one post-tax line in profit or loss and restate comparatives.
- 8Do not recognise a gain for fair value less costs to sell above carrying amount. Keep the carrying amount.
Quickest way: Three-line check for held-for-sale questions
When to use it: Use this on Section A and Section B objective questions where you need a number quickly.
- Depreciate to the date of classification only, then freeze the carrying amount.
- Compute fair value less costs to sell and compare it with the carrying amount.
- Pick the lower figure. The difference, if it is a write-down, is the loss. If fair value is higher, there is no gain and no loss.
Common mistakes in IFRS 5 Non-Current Assets Held for Sale
Continuing to depreciate an asset after it is classified as held for sale.
The asset is still being used in the business, so it feels as though it should wear out.
Fix: Stop depreciation from the classification date. Measurement is now driven by fair value less costs to sell.
Comparing carrying amount with fair value instead of fair value less costs to sell.
Students forget selling costs or think they are expensed later.
Fix: Always deduct the costs to sell before comparing. Selling costs reduce the held-for-sale amount.
Writing an asset up to fair value less costs to sell when it is higher than carrying amount.
Students treat it as a revaluation.
Fix: Held-for-sale measurement is the lower of the two. If fair value less costs to sell is higher, keep the carrying amount. The standard does allow recovery of earlier impairment losses recognised under IFRS 5, but only up to the cumulative loss, which is rarely tested.
Classifying an asset as held for sale because the board decides after the year end to sell it.
Students focus on the intention to sell, not the date.
Fix: The criteria must be met at the reporting date. A later decision is disclosed as a non-adjusting event, if material.
Showing the whole discontinued operation's income and expenses line by line in the main profit or loss.
Students forget the single-line presentation.
Fix: Show one post-tax line for the discontinued operation. Put the analysis in the notes. Restate comparatives too.
Treating any disposal of a division as a discontinued operation.
The word 'discontinued' sounds general.
Fix: Test for a separate major line of business or geographical area, or part of a single co-ordinated plan to dispose of one, or a subsidiary bought only for resale.
Worked examples
Example 1
On 1 January 20X1, Rova had a machine that cost $200,000 on 1 January 20W8. It is depreciated straight line over 10 years with no residual value. On 30 September 20X1 the board met the criteria for held for sale. The machine's fair value is $125,000 and costs to sell are $5,000. The year end is 31 December 20X1. Show the amounts in the financial statements.
Show the solution
- Annual depreciation = $200,000 ÷ 10 = $20,000.
- At 1 January 20X1 the machine is 3 years old, so accumulated depreciation = $60,000 and carrying amount = $140,000.
- Depreciate for 9 months to 30 September 20X1: $20,000 × 9/12 = $15,000. Carrying amount at classification = $140,000 − $15,000 = $125,000.
- Fair value less costs to sell = $125,000 − $5,000 = $120,000.
- The lower figure is $120,000, so the impairment loss = $125,000 − $120,000 = $5,000, charged to profit or loss.
- No further depreciation is charged for the last three months.
Answer: Profit or loss: depreciation $15,000 and impairment loss $5,000. Statement of financial position: asset held for sale of $120,000 in current assets.
Example 2
Tilda has a segment that sells footwear, which is a separate major line of business. At 31 December 20X2 it met the held-for-sale criteria. For the year, the segment made a pre-tax trading loss of $40,000, with tax relief of $8,000. On classification, the segment's net assets were remeasured to fair value less costs to sell, giving a pre-tax write-down of $30,000, with tax relief of $6,000. Show the discontinued operation line and say how it is presented.
Show the solution
- Check the definition: a separate major line of business that is held for sale, so it is a discontinued operation.
- Post-tax trading loss = $40,000 − $8,000 = $32,000.
- Post-tax remeasurement loss = $30,000 − $6,000 = $24,000.
- Total = $32,000 + $24,000 = $56,000 loss.
- Show a single line in profit or loss after profit from continuing operations: loss from discontinued operation $(56,000). Give the analysis in the notes and restate the comparative year.
Answer: Loss from discontinued operation = $56,000, shown as a single post-tax line. The segment's assets and liabilities are shown separately as held for sale.
Exam tips
- In objective questions, check the date the criteria were met. A decision after the year end usually makes the answer 'not held for sale'.
- Always do the depreciation to the date of classification before you compare values. This is the step that most often goes wrong.
- In written answers, list the criteria by name (available now, highly probable, within one year), then apply each to the scenario. Markers award marks for application.
- For discontinued operations, quote the single post-tax line and say that comparatives are restated. Do not list income and expenses line by line.
Practice questions from Tangible non-current assets
IFRS 5 Non-Current Assets Held for Sale 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: frequently asked questions
Do you depreciate an asset held for sale?
No. Depreciation stops from the date the asset is classified as held for sale. Before that date, depreciate normally up to the classification date.
What is the measurement rule for held-for-sale assets?
Measure at the lower of carrying amount and fair value less costs to sell. Any write-down goes to profit or loss as an impairment loss. You do not recognise a gain above carrying amount on first classification.
What is the difference between held for sale and a discontinued operation?
Held for sale is a classification for an asset or disposal group. A discontinued operation is a component that has been disposed of or is held for sale and is a major line of business or area, or a subsidiary bought only for resale. A discontinued operation needs the extra single-line presentation.
What if the sale takes longer than one year?
The asset can stay classified as held for sale only if the delay is caused by events outside the entity's control and the entity remains committed to its plan. Otherwise, the asset is reclassified out of held for sale.