Summary of IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations

When a Dubai company or another business wants to sell an asset or halt a section of its business, then it is evident that future cash flows will be affected. The same is true for the profitability and financial outlook of the company. Therefore, audit firms in Dubai and other financial statement users, especially investors, must stay updated about these events.

This is why Audit Services and other entities were issued with standard IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations. The goal is to explain the results of discontinued operations and disintegrate them from continuing activities.

Therefore, if you are a company in Dubai & UAE wanting to sell noncurrent assets or stop some operations, you should consider IFRS 5. The only exception is when an entity often sells assets acknowledged as noncurrent.

Sales represent a crucial activity, and the associated assets are inventories. For instance, a car dealership is a representative of cars for resale according to IAS 2 inventories, not IFRS 5.

Here are the main rules of IFRS 5:

  • Understanding The Objective of IFRS 5
  • The standard highlights the accounting treatment for assets held for sale.
  • Highlights disclosure and presentation requirements for canceled operations.
  • Auditors should also note that IFRS 5 can be applied for all noncurrent purchases. There is no exception.

This standard also highlights some exceptions of measurement. However, it is still advisable to present and share the information regarding these assets in IFRS 5.

When Audit Services Should Classify An Asset as Held for Sale

Audit specialists should categorize noncurrent assets as held for sale if the carrying figure is recovered via sale instead of continuing use. The same is valid for the disposal group. The IFRS 5 has also introduced the disposal group. It represents assets and liabilities to be presented together in one transaction.

For instance, when a company in Dubai & UAE operates several divisions and chooses to sell one of them, then the assets and liabilities of the division will represent a disposal set.

If we choose to abandon the asset:

Whether auditors would classify noncurrent assets as held for sale, suppose there is a plan to halt its operations.

The answer would be known because you can determine it is carrying through continuing assets and not the sale.

What this means:

It means auditors cannot apply held for sale accounting. In other words, an asset cannot be kept at a lower fair value, fewer costs to sell, and a carrying amount. It also means that the auditors must evaluate the criteria for presenting the abandoned asset.

Recovering The Asset Through A Sale

Here, we try to understand the conditions for classifying an asset as held for sale. Firstly, the disposal or asset group should be present for immediate sale in its current state, and the deal should be probable. IFRS 5 has several considerations for the sale to be highly likely:

  • The managers should commit to a plan to sell the asset.
  • There should be a viable program for finding a buyer.
  • The company should actively market the asset for sale at a price close to its current fair value.

Sale is to be completed within 12 months from the date of clarification:

  • There are fewer significant changes to the plan.
  • The same approach is applied to assets held for distribution to owners.

Accounting for Assets Held For Sale

Once an auditor has classified a disposal group or an asset as held for sale, it should be measured according to IFFRS 5. But the standard highlights a few measurement exceptions:

  • IAS 12 Income Taxes (Deferred Tax Assets)
  • IAS 19 Employee Benefits (assets from employee benefits)

Financial Assets Under IFRS 9 Financial Instruments

Noncurrent assets are recognized based on the fair value model in IAS 40 Investment Property.

Noncurrent assets are accounted for at fair value minus selling costs based on IAS 41 agriculture.

Contract rights (insurance contracts) under IFRS 4 Insurance Contracts.

When auditors classify the above asset types as assets held for sale, they continue to measure them under the same accounting policies before classifications.

You may wonder why it is essential to classify the assets as held for sale:

For one, while the accounting treatment remains unchanged,  the presentations and disclosures are changed. Audit Services in Dubai & UAE still need to present the assets individually from others and share some extra data.

Classification and Then Measurement

Before classifying an asset as held for sale, an item of property, plant, and equipment will be measured under IAS 16. After organizing an asset as held for sale, the auditor must measure it lower than its carrying figure and fair value minus costs to sell.


As for impairments, it should be recognized as IFRS just before classification as held for sale. For instance, in IAS 36 for property, plant, and equipment. The auditor will recognize impairment loss in profit/loss in this situation.

Learn More About IFRS 5

Audit firms in Dubai offer bespoke auditing and consultation services in Dubai and UAE. Get in touch with us for more discussion.

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