CA Final · Financial Reporting

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Ind AS 105 covers non-current assets (or disposal groups) whose carrying amount will be recovered mainly through sale, not use. Check the classification criteria, measure at the lower of carrying amount and fair value less costs to sell, stop depreciation, and present discontinued operations separately in the statement of profit and loss.

What this chapter covers

Ind AS 105 deals with two linked ideas. The first is how to treat a non-current asset or a disposal group when the entity expects to recover its value mainly by selling it. The second is how to present a component of the entity that has been disposed of or is held for sale, called a discontinued operation.

The standard is short, but questions on it are rule-heavy. You must apply the criteria to a case: is the asset available for immediate sale in its present condition, and is the sale highly probable? The highly probable test has its own elements: management commitment, an active programme to locate a buyer, marketing at a reasonable price, and expected completion within one year, with limited exceptions for delays outside the entity's control. Then you must measure the asset and show where it goes in the financial statements.

This chapter connects to several others in Financial Reporting. It uses ideas from Ind AS 16 (depreciation and carrying amount), Ind AS 36 (impairment), Ind AS 1 (presentation), and Ind AS 110 (loss of control of a subsidiary). It also links to Ind AS 108 and Ind AS 33, where disclosures and per-share figures are affected by discontinued operations. Paper 6 case studies can also use it in group restructuring scenarios.

Ind AS 105 is a compact chapter with predictable question patterns: classification tests, measurement at the lower of two amounts, impairment loss and reversal, and discontinued operation presentation. Once you learn the logic, you can score full marks on both case-scenario MCQs and written answers without long calculations. It also appears as a sub-issue inside bigger questions on group accounts or restructuring, so weak knowledge here can cost marks in other chapters.

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations: topics in the order to study them

1Scope and Definitions under Ind AS 105Terms such as disposal group, fair value less costs to sell, and component of an entity are used in every later topic, so learn them first.
2Classification as Held for Sale or Held for DistributionClassification decides whether the standard applies at all, so it must come before measurement.
3Measurement of Assets Held for SaleOnce classified, you measure the asset; this is the main calculation area and builds on Ind AS 16 and Ind AS 36.
4Discontinued OperationsThis uses the held for sale concept and adds the test for a separate component, so it follows measurement.
5Presentation and Disclosure RequirementsPresentation makes sense only after you know what is being classified, measured and discontinued.

How to prepare Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Treat this chapter as a decision flow: does it qualify, how is it measured, how is it shown. Practise with short cases rather than only reading the text.

Read the definitions once and write them in your own words, especially disposal group, component of an entity and costs to sell.
Learn the classification conditions as a checklist and apply it to short scenarios, asking which condition fails each time.
Practise measurement in a fixed format: carrying amount before classification, fair value less costs to sell, lower of the two, impairment loss, then effect on depreciation.
Work out how an impairment loss on a disposal group is allocated to assets within the scope of the measurement rules, and how later gains are limited.
Draw a simple layout of the statement of profit and loss with a single line for the post-tax amount from discontinued operations (post-tax profit or loss of the operations plus post-tax gain or loss on remeasurement or disposal), and practise filling it.
Solve past ICAI questions and case-scenario MCQs, writing the answer as rule, application to the facts, conclusion.
Finish by revising your one-page summary of classification, measurement and presentation rules.

Common mistakes in Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Continuing to charge depreciation on an asset after it is classified as held for sale.
Fix: Write 'stop depreciation from the date of classification' as the first line of every held for sale answer.
Measuring at fair value instead of fair value less costs to sell.
Fix: Always compute fair value less costs to sell first, then compare it with carrying amount.
Classifying an asset as held for sale just because management intends to sell it.
Fix: Run the full checklist on every case and state which condition passes or fails.
Treating any closed or sold item as a discontinued operation.
Fix: Test for a separate major line or area first; selling one asset or a minor unit is usually not a discontinued operation.
Offsetting assets and liabilities of a disposal group, or mixing them with other balance sheet lines.
Fix: Show held for sale assets and related liabilities as separate lines, each presented separately from other assets and liabilities.
Answering with the rule alone and not applying it to the facts.
Fix: Use provision, facts, conclusion in every written answer, and quote the specific facts from the case.

Last-day revision: Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Held for sale means carrying amount will be recovered mainly through a sale, not continuing use.
The asset must be available for immediate sale in its present condition and the sale must be highly probable.
Highly probable needs management commitment, an active programme, a reasonable price and an expected completion within one year, with limited exceptions for delays outside the entity's control.
Measure at the lower of carrying amount and fair value less costs to sell.
Stop depreciation and amortisation once an asset is classified as held for sale.
Recognise an impairment loss for any write-down to fair value less costs to sell. Recognise a gain for any later increase in fair value less costs to sell, but not in excess of the cumulative impairment loss recognised earlier (under Ind AS 105 or Ind AS 36). Any gain or loss not previously recognised is recognised on the date of derecognition.
Present held for sale assets and related liabilities separately in the balance sheet, without offsetting them.
A discontinued operation is a component that has been disposed of or is held for sale, and either is a separate major line of business or geographical area, or is part of a single plan to dispose of one, or is a subsidiary acquired exclusively with a view to resale.
Show a single amount on the face of the statement of profit and loss, comprising the post-tax profit or loss of discontinued operations plus the post-tax gain or loss on remeasurement to fair value less costs to sell, or on disposal, of the related assets or disposal group. Give the analysis of this amount in the notes or on the face.
Do not restate prior-period balance sheet amounts for held for sale classification, but restate comparative profit and loss for discontinued operations.
Assets held for distribution to owners follow similar classification rules, but are measured at the lower of carrying amount and fair value less costs to distribute.
If criteria are no longer met, reclassify and measure at the lower of carrying amount before classification (adjusted for depreciation, amortisation or revaluations that would have been recognised had it not been classified as held for sale) and recoverable amount at the date of the decision not to sell. Include any adjustment to the carrying amount in income from continuing operations.

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations practice questions

Ind AS 105 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.

Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations: frequently asked questions

Does depreciation continue on a held for sale asset?

No. Depreciation and amortisation stop from the date the asset is classified as held for sale. Interest and other expenses on related liabilities continue to be recognised.

What is a disposal group?

It is a group of assets to be disposed of together in a single transaction, along with the liabilities directly associated with them. It may include a cash-generating unit or part of one.

Is every held for sale asset a discontinued operation?

No. Held for sale classification applies to individual assets and disposal groups. A discontinued operation must also be a component of the entity that is a separate major line of business or geographical area, or part of a single plan to dispose of one, or a subsidiary acquired exclusively with a view to resale.

How much time should I give to Ind AS 105?

It is a short chapter, so a few focused sessions are usually enough. Spend most of the time on classification cases and the measurement format, then revise the presentation layout.