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

Sundaram Textiles Ltd is evaluating whether to classify a machine as held for sale under Ind AS 105. Management has decided to sell the machine but intends to complete the sale only after several years, when a new plant is commissioned. Which statement is correct as per Ind AS 105?

The machine cannot be classified as held for sale. Ind AS 105 clarifies that an asset cannot be classified as held for sale if the entity intends to sell it in a distant future, even where management has decided to sell it eventually.

  1. AThe machine can be classified as held for sale because management has committed to a plan to sell it
  2. BThe machine cannot be classified as held for sale because the entity intends to sell it in a distant futureCorrect
  3. CThe machine must be classified as held for sale because it will be recovered principally through sale
  4. DThe machine can be classified as held for sale only if a buyer has already signed a binding agreement

Explanation

Ind AS 105 (paragraph 7, as clarified in the Ind AS version compared to IFRS 5) states that a non-current asset cannot be classified as held for sale if the entity intends to sell it in a distant future. A mere intention to sell does not suffice. Option A ignores this clarification, and option D wrongly requires a signed contract.

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