Strategic Business Reporting (International) · 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 or disposal group will be recovered mainly through sale, not use. It must be available for immediate sale and the sale must be highly probable. You measure it at the lower of carrying amount and fair value less costs to sell, stop depreciating it, and present it separately.

Understand IFRS 5 Non-current Assets Held for Sale

Most non-current assets earn their value through use. Some are going to be sold instead. IFRS 5 tells you when to treat an asset that way and how to show it, so users can see which resources will leave the business soon.

An asset (or a disposal group, a group of assets and directly linked liabilities to be sold together in one transaction) is held for sale when its carrying amount will be recovered mainly through a sale. Two tests must both be met. The asset must be available for immediate sale in its present condition, subject only to usual terms. The sale must be highly probable. That needs management commitment to a plan, an active programme to find a buyer, a price that is reasonable compared with current fair value, an expected sale within one year of classification (with limited exceptions for delays outside the entity's control), and a plan unlikely to change or be withdrawn.

Once classified, you measure the asset at the lower of carrying amount and fair value less costs to sell (FVLCS). Depreciation stops. If FVLCS is lower, you recognise an impairment loss in profit or loss. A later gain is recognised only up to the cumulative impairment previously recognised under IFRS 5 (or earlier under IAS 36 for the non-current assets in scope). Assets held for sale are shown separately from other assets, and the liabilities of a disposal group are shown separately from other liabilities. Do not offset them. Comparatives in the statement of financial position are not restated.

A discontinued operation is a different idea. It is a component of the entity that has been disposed of or classified as held for sale, and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line or area, or is a subsidiary acquired exclusively with a view to resale. A held-for-sale asset need not be a discontinued operation. A single machine is held for sale but is not a discontinued operation.

For a discontinued operation, the statement of profit or loss shows one single amount after tax. It comprises the post-tax profit or loss of the operation and the post-tax gain or loss on remeasurement to FVLCS or on disposal. Comparative profit or loss figures are restated to show the operation as discontinued. Some assets in a disposal group are outside IFRS 5 measurement rules, for example deferred tax assets, employee benefit assets, financial assets within IFRS 9 and investment property at fair value. These are measured under their own standards first.

Key rules to remember

Measurement on classification: Carrying amount = lower of (carrying amount before classification, FVLCS); Measure just before classification under the applicable standards, then compare with FVLCS.
Fair value less costs to sell: FVLCS = Fair value − Costs to sell; Costs to sell are incremental costs directly attributable to the sale, such as legal fees. Finance costs and tax expense are excluded.
Impairment on classification: Impairment loss = Carrying amount − FVLCS (if positive); Recognised in profit or loss. For a disposal group it is allocated first to goodwill, then to the other assets within IFRS 5 measurement scope pro rata to carrying amounts.
Depreciation: Depreciation after classification = nil; Stops from the date of classification. Interest and other expenses on liabilities of the group continue to be recognised.
Classification criteria: Available for immediate sale + sale highly probable (usually within 12 months); Both must be met at the reporting date. If met only after the reporting period, do not classify as held for sale at that date.
Discontinued operations single line: Single amount = post-tax profit or loss of operation + post-tax gain or loss on remeasurement or disposal; Shown on the face of the statement of profit or loss, with analysis in the notes or on the face.

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

Use this order for any IFRS 5 question, whether it is calculation, discussion or a mix of both.

1Test the criteria. Check each one: available for immediate sale, management committed, active marketing, reasonable price, sale expected within one year, plan unlikely to change. Use facts from the scenario and state your conclusion.
2Decide the scope. Identify whether it is a single asset or a disposal group. List the assets and liabilities in it, and spot items measured under other standards.
3Update the carrying amount. Bring the asset to the date just before classification. Charge depreciation up to that date only.
4Calculate FVLCS. Take the expected fair value and deduct the costs to sell.
5Compare and measure. Use the lower figure. Book any impairment in profit or loss, allocating first to goodwill for a disposal group.
6Present it. Show held-for-sale assets and liabilities as separate lines, with no offset and no restated comparatives for the statement of financial position.
7Test for discontinued operation. If it is a major line of business or geographical area, show the single post-tax amount in profit or loss and restate comparatives. Add the required disclosures.
8Add professional comment where asked. Note judgement, management bias or earnings management risks.

Quickest way: Four-line IFRS 5 check

When to use it: Use this when time is short and the question asks for the amount at the reporting date or the impact on profit.

Write: criteria met? Yes or no, with one reason from the scenario.
If no, stay under the normal standard (for example IAS 16 with depreciation) and stop.
If yes, write carrying amount, then FVLCS. Pick the lower figure.
Put the difference to profit or loss as impairment, and say depreciation stops. Then state the line item and whether it is a discontinued operation.

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

Classifying as held for sale because management intends to sell, without checking the other criteria.
Students treat intention as enough and ignore the need for an active programme and a reasonable price.
Fix: Tick off every criterion using facts from the scenario. An asset priced far above fair value or not yet marketed fails the test.
Comparing with fair value instead of fair value less costs to sell.
The costs to sell are small or are given as a note at the bottom of the question.
Fix: Always deduct costs to sell before comparing. Write FVLCS as its own line.
Continuing to depreciate the asset after classification.
Habit from IAS 16 and the asset still being in use.
Fix: Charge depreciation only up to the classification date. After that, none.
Treating every held-for-sale item as a discontinued operation.
The two ideas appear in the same standard and are often taught together.
Fix: Ask separately whether it is a separate major line of business or geographical area, or a subsidiary acquired for resale. A single asset or small division usually is not.
Offsetting liabilities of a disposal group against its assets, or restating prior year statement of financial position.
Students think showing a net figure is neater.
Fix: Show assets and liabilities held for sale as separate lines. Do not restate the comparative statement of financial position.
Allocating an impairment of a disposal group evenly across all assets.
Forgetting the order set by IAS 36 and that some assets sit outside IFRS 5 measurement.
Fix: Remeasure the out-of-scope items under their own standards first. Then allocate the loss to goodwill, then pro rata to the other in-scope assets.

Worked examples

Example 1

At 31 March 20X5 Delta had a machine with a cost of $500,000 and accumulated depreciation of $300,000 at 1 April 20X4. Depreciation is straight line over 10 years with no residual value. On 1 January 20X5 management committed to a plan to sell the machine, began an active search for a buyer, and set a price in line with fair value. A sale is expected within six months. The machine is available for immediate sale. Fair value is $170,000 and costs to sell are $10,000. Show the accounting at 31 March 20X5.

Show the solution

Criteria: the machine is available now, management is committed, it is actively marketed at a reasonable price and the sale is expected within one year. It is held for sale from 1 January 20X5.
Annual depreciation is $500,000 ÷ 10 = $50,000. Carrying amount at 1 April 20X4 is $500,000 − $300,000 = $200,000.
Depreciation to 1 January 20X5 is 9 months: $50,000 × 9 ÷ 12 = $37,500. Carrying amount just before classification is $200,000 − $37,500 = $162,500.
FVLCS is $170,000 − $10,000 = $160,000.
Lower of $162,500 and $160,000 is $160,000. Impairment loss is $162,500 − $160,000 = $2,500, charged to profit or loss.
No depreciation is charged from 1 January 20X5 to 31 March 20X5. The machine is shown as a separate current asset held for sale at $160,000.

Answer: Total charge to profit or loss for the year is depreciation of $37,500 plus impairment of $2,500. The machine is presented at $160,000 as an asset held for sale, with no further depreciation.

Example 2

Sigma plans to sell its entire Division R, which is a separate major line of business, and the IFRS 5 criteria were met at the year end of 31 December 20X6. Division R's net assets within the disposal group have a carrying amount of $12m after allowing for any assets outside IFRS 5 measurement. This includes goodwill of $2m. Fair value of the disposal group is $11m and costs to sell are $0.5m. Division R made a post-tax profit of $1.4m in the year. The tax relief on any loss on remeasurement is nil. Explain the accounting and compute the discontinued operations figure.

Show the solution

Classification: the criteria are met and Division R is a separate major line of business. It is held for sale and also a discontinued operation.
FVLCS = $11m − $0.5m = $10.5m.
Carrying amount is $12m, so the impairment loss is $12m − $10.5m = $1.5m.
Allocate the loss to goodwill first. Goodwill falls by $1.5m from $2m to $0.5m. No loss is left for other assets.
Discontinued operations amount: post-tax profit of $1.4m less the remeasurement loss of $1.5m (no tax relief) gives a loss of $0.1m.
Presentation: show a single line, loss from discontinued operations of $0.1m, on the face of the statement of profit or loss. Restate the comparative profit or loss for Division R as discontinued. In the statement of financial position show the disposal group's assets and its liabilities as separate lines. Do not restate the comparative statement of financial position. Stop depreciation on its non-current assets within scope.

Answer: Disposal group is measured at $10.5m after an impairment of $1.5m, all against goodwill. The statement of profit or loss shows a single loss from discontinued operations of $0.1m, and Division R's results are removed from continuing lines.

Exam tips

Write the criteria as a short checklist and link each to a fact in the scenario. Markers reward application, not a list copied from the standard.
Look for traps that fail classification: sale expected after more than a year for reasons in the entity's control, a price well above fair value, a buyer's deal that is still conditional on major changes, or the criteria only met after the year end.
Show the comparison line clearly: carrying amount, FVLCS, lower figure, impairment. Even if one number is wrong, the method marks stay available.
Separate the two questions in your answer: is it held for sale, and is it a discontinued operation. Answer both explicitly.
In ethics or professional skills parts, note that classification is a judgement. Management may want to move losses into discontinued operations or flatter continuing results, so a sceptical challenge adds marks.

Practice questions from 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

What is the difference between held for sale and discontinued operations?

Held for sale is a classification and measurement rule for an asset or disposal group that will be recovered mainly through sale. A discontinued operation is a component, such as a separate major line of business or geographical area, that has been disposed of or is held for sale. It leads to special presentation in profit or loss.

Do I depreciate an asset classified as held for sale?

No. Depreciation stops from the date of classification. You still depreciate up to that date, then measure at the lower of carrying amount and FVLCS.

Can I reverse an impairment on a held-for-sale asset?

If FVLCS later rises, you can recognise a gain, but only up to the cumulative impairment losses already recognised on the asset. Any gain above that is not recognised until the sale. Goodwill impairment is never reversed.

What happens if the asset no longer meets the criteria?

You stop classifying it as held for sale. You measure it at the lower of its carrying amount before classification, adjusted for any depreciation that would have been charged, and its recoverable amount at the date of the decision not to sell. The adjustment is shown in profit or loss from continuing operations.