Strategic Business Reporting (International) · Presentation and disclosure in financial statements

IFRS 5 Discontinued Operations and Held for Sale for ACCA SBR

Updated 11 October 2026 · Fact-checked

IFRS 5 applies when an entity expects to recover an asset or disposal group mainly through sale, not use. Classify it as held for sale when it is available for immediate sale and the sale is highly probable. Measure it at the lower of carrying amount and fair value less costs to sell, and stop depreciating it.

Understand IFRS 5 Discontinued Operations and Held for Sale

Most assets earn their value by being used. Some are going to be sold instead. IFRS 5 gives users a clear signal about these assets so they can see what the entity will still own and operate in future.

An asset (or disposal group, a group of assets and directly related liabilities to be sold together in one transaction) is classed as held for sale if its carrying amount will be recovered mainly through a sale. Two tests matter. It must be available for immediate sale in its present condition. The sale must be highly probable: management is committed to a plan, an active programme to find a buyer has started, the price is reasonable compared with current fair value, the sale is expected to complete within one year of classification, and the plan is unlikely to change significantly. A delay beyond one year is allowed where events are outside the entity's control and the entity is still committed to the plan.

Once classified, you measure at the lower of carrying amount and fair value less costs to sell. Depreciation stops. Any write-down is an impairment loss, charged in profit or loss. If the disposal group includes assets outside IFRS 5's measurement rules (such as financial instruments, deferred tax, employee benefit assets and investment property at fair value), those are measured under their own standards first. The remeasurement loss is then allocated to the non-current assets within the scope of IFRS 5 measurement. Gains on later increases in fair value are recognised only up to the cumulative impairment losses previously recognised, under IFRS 5 or IAS 36, on those in-scope non-current assets. A gain cannot reverse a goodwill impairment loss, because a goodwill impairment loss is never reversed.

A discontinued operation 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. Its post-tax result, plus any post-tax gain or loss on remeasurement or disposal, is shown as a single amount on the face of the statement of profit or loss. Comparatives are re-presented.

In the statement of financial position, held-for-sale assets and liabilities are shown separately from other assets and liabilities. They are not netted off. Prior-year balances are not reclassified.

Key rules to remember

Measurement on classification: Carry at the lower of: carrying amount; fair value less costs to sell; Carrying amount is measured under the applicable standards just before classification. Any write-down goes to profit or loss as an impairment loss.
Held for sale criteria: Available for immediate sale in present condition AND sale highly probable; Highly probable means management committed, active buyer search, reasonable price, completion expected within one year (with limited exceptions), and plan unlikely to change.
Depreciation: Depreciation = nil after classification as held for sale; Applies to non-current assets in the group. Interest and other expenses on liabilities in a disposal group continue to be recognised.
Later gains: Gain recognised ≤ cumulative impairment losses previously recognised; Cumulative losses include those recognised under IFRS 5 and earlier impairment under IAS 36 on the non-current assets in scope. A gain on remeasurement cannot reverse a goodwill impairment loss (IAS 36.124 and IFRS 5.21-22).
Discontinued operation presentation: Single amount = post-tax profit or loss of the operation + post-tax gain or loss on remeasurement or disposal; Shown on the face of the statement of profit or loss. Comparatives are re-presented to show it as discontinued.
Allocation of a write-down in a disposal group: Loss reduces the carrying amounts of the non-current assets within IFRS 5 measurement scope, using the IAS 36 allocation order: goodwill first, then pro rata to the other in-scope non-current assets; Assets outside scope, such as financial assets, deferred tax and inventory, are remeasured under their own standards first.

How to solve IFRS 5 Discontinued Operations and Held for Sale questions

Work through the same sequence each time. It matches how markers allocate marks: classify, measure, present, then explain.

1Read the scenario for dates and facts: when was the plan approved, is a buyer being sought, is the asset still in use, and is completion expected within one year.
2Test each held-for-sale criterion against the facts. State the criterion, then say whether it is met or not. If any is not met at the reporting date, the asset stays in its normal category and is depreciated.
3If classified as held for sale, update the carrying amount under the normal standard to the date of classification. That includes depreciation up to that date and any revaluation.
4Compare carrying amount with fair value less costs to sell. Take the lower. Record any write-down as an impairment loss in profit or loss, allocated against the in-scope non-current assets.
5Stop depreciation from the classification date. Re-test at each reporting date for further write-downs or limited reversals.
6Decide whether the component is a discontinued operation. Check for a separate major line of business or geographical area, or a subsidiary acquired for resale, and whether it has been disposed of or classified as held for sale.
7Present it. Show held-for-sale assets and liabilities as separate lines, and show the single post-tax amount for discontinued operations. Re-present comparatives in the statement of profit or loss.
8Add the disclosures and a short comment on the effect on users, with a professional-skills point if the scenario hints at management bias.

Quickest way: Classify, measure, present in three lines

When to use it: Use this when time is short, or for a small part-mark on a larger group question.

Line 1: write the criteria. Available now, highly probable, within one year. Say which fact meets or fails each.
Line 2: calculate the lower of carrying amount and fair value less costs to sell. Put the loss in profit or loss and stop depreciation.
Line 3: for presentation, say separate line in the statement of financial position and a single post-tax amount in profit or loss if it is a major line or area.
Check the discontinued operation test separately. A held-for-sale asset is not automatically a discontinued operation.

Common mistakes in IFRS 5 Discontinued Operations and Held for Sale

Classifying as held for sale because management has an intention to sell, with no active plan.
Students treat intention as enough and ignore the highly probable test.
Fix: Check each condition: committed plan, active programme to locate a buyer, reasonable price, expected completion within a year. Without these, no reclassification.
Continuing to depreciate an asset after it is classified as held for sale.
Students keep applying IAS 16 out of habit.
Fix: Stop depreciation from the classification date. Say this explicitly in your answer.
Measuring at fair value instead of fair value less costs to sell.
Costs of disposal are overlooked in the data given.
Fix: Always deduct the incremental costs of selling before comparing with carrying amount.
Treating every held-for-sale asset as a discontinued operation.
The two ideas appear in the same standard and are confused.
Fix: Apply the separate tests. A single machine held for sale is not a discontinued operation. A component must be a separate major line or geographical area.
Restating prior-year statement of financial position for held-for-sale items.
Students re-present comparatives everywhere.
Fix: Comparatives are re-presented for the statement of profit or loss, not reclassified in the prior-year statement of financial position.
Netting held-for-sale liabilities against the assets.
Students want to show a single net asset figure.
Fix: Show assets and liabilities of a disposal group as separate lines, not offset.

Worked examples

Example 1

At 31 December 20X1, Delta's reporting date, a machine has a carrying amount of $400,000 after depreciation to that date. On 1 December 20X1 the board approved a plan to sell it, a buyer search began, and the asking price is reasonable. The machine is ready for immediate sale and completion is expected by April 20X2. Fair value is $380,000 and costs to sell are $10,000. Explain the treatment and calculate the amounts.

Show the solution

Criteria: the machine is available for immediate sale, management is committed, an active programme is under way, the price is reasonable and completion is within one year. It is held for sale.
Carrying amount just before classification is $400,000.
Fair value less costs to sell = $380,000 − $10,000 = $370,000.
Lower of $400,000 and $370,000 is $370,000.
Impairment loss = $400,000 − $370,000 = $30,000, recognised in profit or loss.
Present the machine as a held-for-sale asset at $370,000, separately from other assets. No depreciation is charged after classification.

Answer: Classify as held for sale at $370,000 and recognise an impairment loss of $30,000 in profit or loss. Stop depreciating and show it as a separate line.

Example 2

Omega has a subsidiary, Sigma, which is its only operation in a distinct geographical region. On 30 June 20X2 the board committed to selling Sigma and began marketing it, and the sale is highly probable within a year. Sigma's non-current assets were depreciated up to 30 June 20X2, and at that date fair value less costs to sell was above carrying amount, so no write-down arose then. At the year end of 31 December 20X2 Sigma's net assets in the group accounts are $5.0m, including goodwill of $0.6m, and fair value less costs to sell is $4.4m. Sigma's post-tax profit for the year was $0.3m. All Sigma's assets are within IFRS 5 measurement scope. Explain the treatment and calculate the amounts.

Show the solution

Held for sale: the plan is committed, marketed, highly probable and Sigma is available for sale. The classification date is 30 June 20X2, and the criteria are still met at 31 December 20X2.
Classification date: at 30 June 20X2, update Sigma's carrying amount under the normal standards, including depreciation to that date. Compare it with fair value less costs to sell. Here no write-down arose. Depreciation of Sigma's non-current assets stops from 30 June 20X2, so the $5.0m at 31 December 20X2 reflects no depreciation after that date.
Discontinued operation: Sigma is a component representing a separate geographical area of operations and is classified as held for sale, so it qualifies.
Measurement at 31 December 20X2: carrying amount $5.0m against fair value less costs to sell $4.4m. The lower is $4.4m.
Write-down = $5.0m − $4.4m = $0.6m. Allocate first to goodwill, which is $0.6m, so goodwill is written down to nil. Nothing is left to allocate to other assets. A later gain cannot reverse this goodwill loss. Any later gain would be limited to the cumulative losses on Sigma's other in-scope non-current assets, whether recognised under IFRS 5 or IAS 36, which are currently nil.
Profit or loss: show a single line for the discontinued operation = post-tax profit $0.3m − write-down $0.6m = loss of $0.3m. The write-down is not tax-effected in this example because no tax is stated.
Statement of financial position: show Sigma's assets and liabilities as separate held-for-sale lines, with net assets of $4.4m. Re-present comparatives in the statement of profit or loss.

Answer: Sigma is a discontinued operation held for sale from 30 June 20X2, with depreciation stopped from that date. At 31 December 20X2 the write-down of $0.6m eliminates goodwill, and that loss cannot be reversed. The single discontinued amount in profit or loss is a loss of $0.3m, and net assets are shown at $4.4m as separate held-for-sale assets and liabilities.

Exam tips

Always apply the criteria to the scenario facts. Marks go for linking each criterion to a detail, not for reciting the list.
Spot trap facts: no buyer search, price well above fair value, or completion expected beyond one year with no outside delay. These usually mean the asset should not be classified as held for sale.
Keep held for sale and discontinued operation as two separate questions in your answer, with a separate conclusion for each.
For professional skills marks, comment on whether management might use classification to flatter continuing profit or avoid depreciation, and on what users need to see.
Show workings for the write-down allocation. Allocate the write-down to the in-scope non-current assets using the IAS 36 order: goodwill first, then pro rata to the other in-scope non-current assets. A later gain cannot reverse a goodwill write-down. Other cumulative losses on the in-scope non-current assets, whether recognised under IFRS 5 or IAS 36, cap later gains.

Practice questions from Presentation and disclosure in financial statements

IFRS 5 Discontinued Operations and 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 Discontinued Operations and Held for Sale: frequently asked questions

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

Held for sale is a classification for an asset or disposal group whose value will be recovered mainly through sale. A discontinued operation is a component that has been disposed of or is held for sale and represents a major line of business or geographical area. An asset can be held for sale without being a discontinued operation.

Do you depreciate an asset held for sale?

No. Depreciation stops from the date of classification. The asset is carried at the lower of carrying amount and fair value less costs to sell, and it is tested again at each reporting date.

What if the sale takes more than one year?

The one-year expectation is a criterion for classification. A longer period is acceptable where events outside the entity's control cause the delay and the entity remains committed to the plan. Otherwise the asset should not be classified, or should be reclassified out of held for sale.

How are discontinued operations shown in profit or loss?

They appear as one amount on the face of the statement of profit or loss. It combines the post-tax result of the operation and the post-tax gain or loss on remeasurement or disposal. Analysis of that amount is given on the face or in the notes, and comparatives are re-presented.