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CA Final · Financial Reporting · Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations

Mahalaxmi Textiles Ltd is preparing its financial statements under Ind AS. The management has decided to sell a spare weaving unit, but the board expects the sale to happen only after several years once a new plant is commissioned. Which statement is correct about classifying the unit as held for sale under Ind AS 105?

The unit cannot be classified as held for sale. Ind AS 105 clarifies in paragraph 7 that an asset or disposal group cannot be classified as held for sale if the entity intends to sell it in a distant future, even if the board has decided to sell it.

  1. AIt can be classified as held for sale because management has decided to sell, however distant the sale may be
  2. BIt cannot be classified as held for sale because the entity intends to sell it in a distant futureCorrect
  3. CIt must be classified as held for sale because the decision is board-approved
  4. DIt can be classified as held for sale only if a discontinued operation is also reported

Explanation

Ind AS 105 adds a clarification, absent from IFRS 5, to the conditions in paragraph 7: a non-current asset (or disposal group) cannot be classified as held for sale if the entity intends to sell it in a distant future. A board decision alone does not suffice, so options A and C are wrong. Discontinued operation reporting is unrelated to this classification test.

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