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

Surya Textiles Ltd's board decided to dispose of a dyeing unit, but the plan is to sell it only after about four years when new capacity becomes operational. A buyer has shown informal interest. The finance manager wants to present the unit as held for sale at the reporting date. Under Ind AS 105, what is the correct position?

The unit should not be classified as held for sale. Ind AS 105 clarifies that a non-current asset or disposal group cannot be held for sale if the entity intends to sell it in a distant future, and a plan to sell after four years is distant.

  1. AClassify as held for sale because a buyer has shown interest
  2. BClassify as held for sale if the board decision is minuted
  3. CDo not classify as held for sale, as the entity intends to sell it in a distant futureCorrect
  4. DClassify as held for sale but measure at carrying amount without costs to sell

Explanation

Ind AS 105 adds a clarification to the conditions for held for sale classification that an asset or disposal group cannot be classified as held for sale if the entity intends to sell it in a distant future. A four-year horizon is such a case, so informal interest and a board minute do not change the answer.

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