Section 3475: Disposal of Long-Lived Assets and Discontinued Operations

ASPE: 3475

This section does not apply to the following assets:

A disposal group is a group of assets to be disposed together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction
This section also applies to disposal groups in addition to individual assets

A long-lived asset to be disposed of other than by sale shall continue to be classified as held and used until it is disposed of
This includes assets that are to be abandoned

A long-lived asset to be sold shall be classified as held for sale in the period in which all of the following criteria are met:

management commits to a plan to sell;
it is available for immediate sale in its present condition
an active program to locate a buyer and other actions required to complete the sale plan have been initiated;
the sale is probable and is expected to be sold within one year
it is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and
actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A long-lived asset classified as held for sale shall be measured at the lower of its:
- carrying amount; or
- fair value less cost to sell.
Amortization is not taken while an asset is classified as held for sale
A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell
A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized for a write-down to fair value less cost to sell required by this Section

If a long-lived asset no longer meets the criteria to be classified as held for sale, it shall be measured individually at the lower of:
1. carrying amount before it was classified as held for sale, adjusted for any amortization that would have been recognized had it been continuously classified as held and used; or
2. fair value at the date of the subsequent decision not to sell

A long-lived asset classified as held for sale is presented separately in the balance sheet
Long-lived assets classified as held for sale are not reclassified as current assets, unless
- the enterprise has sold the assets prior to the date of completion of the financial statements; and
- the proceeds of the sale will be realized within a year of the date of the balance sheet, or within the normal operating cycle if that is longer than a year.

The results of operations of a component of an enterprise that either
- has been disposed of (by sale, abandonment or spin-off); or
- is classified as held for sale is reported in discontinued operations if both of the following conditions are met:
  1. the operations and cash flows of the component have been (or will be) eliminated as a result of the disposal transaction; and
  2. the enterprise will not have any significant continuing involvement in the operations of the component after the disposal transaction
A component of an enterprise includes operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the enterprise
Examples of components include:
- operating segment
- a reporting
- a subsidiary
- an asset group
- operations without long-lived or other assets.
An operating segment is a component of an enterprise:
- that earns revenues and incur expenses
- for which operating results are regularly reviewed
- for which separate information is available

This topic is covered under IFRS 5
IFRS covers assets held for distribution to owners
Under IFRS, you are allowed to write up the asset if the fair value less cost to sell subsequently increases; the reversal is limited to losses taken under IFRS 5 and any previous impairment losses taken when the asset was classified as held for use
When the asset no longer qualifies as held for sale, under IFRS, asset is re-measured at the lower of “carrying value had the asset not been classified as held for sale” and the “recoverable amount” (rather than fair value)
Under ASPE, “non-current assets held for sale” are shown as current assets if the assets are sold before the completion of the F/S; IFRS makes no mention of this – however, if a similar situation occurs, we would likely show “non-current assets held for sale” as current assets
Under ASPE the criteria for classifying the loss due to re-measuring an asset held for sale under discontinued operations is different