IFRS 5 - Non-Current Assets

Q: What happens if a reclassified asset is not sold within 12 months?

If not sold within a year, and the conditions for 'held for sale' classification are no longer met, the asset must be reclassified and re-measured accordingly.

Q: Is revaluation allowed under IFRS 5?

No. IFRS 5 does not permit upward revaluation. Only impairment losses or gains on remeasurement to fair value less costs to sell are recognized.

IFRS 5 - Non-Current Assets Held for Sale & Discontinued Operations

IFRS Guide>>

July 10, 2025

IFRS 5, issued by the International Accounting Standards Board (IASB) in 2004, outlines how companies should account for non-current assets held for sale and how to present discontinued operations in financial statements.

This standard enhances transparency, comparability, and decision-making for stakeholders.

In this article, we explore the key definitions, historical context, provisions, scope, disclosure requirements, and frequently asked questions related to IFRS 5.

Key Takeaways – IFRS 5

IFRS 5 governs the classification, measurement, and disclosure of non-current assets held for sale and discontinued operations.
A non-current asset is classified as held for sale if it is available for immediate sale and the sale is highly probable within 12 months.
Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell; depreciation stops upon classification.
Discontinued operations are major business components that are disposed of or classified as held for sale and must be presented separately in the income statement.
IFRS 5 improves transparency, enhances comparability, and helps users understand the financial impact of asset disposals and business exits.
Detailed disclosure requirements apply, including explanations for delays, impairment losses, and cash flow effects of discontinued operations.

What is IFRS 5?

IFRS 5 governs:

Non-current assets held for sale
Discontinued operations

It ensures that such transactions are properly presented and measured to give users of financial statements clearer insight into resource allocation.

What is a Non-Current Asset Held for Sale?

A non-current asset is classified as held for sale when:

Its value is expected to be recovered through sale rather than use
It is available for immediate sale in current condition
Sale is highly probable within one year

Key Impacts:

Measured at the lower of carrying amount and fair value less costs to sell
Depreciation stops upon classification

What is a Discontinued Operation?

A discontinued operation refers to a part of the business that:

Is disposed of or classified as held for sale
Is a major line of business or geographical area
Is part of a coordinated plan to exit a significant segment

N/B: These operations must be presented separately in the statement of profit or loss.

Brief History of IFRS 5

Year	Milestone
June 1998	The International Accounting Standards Committee originally issued IAS 35 – Discontinuing operations.
April 2001	The International Accounting Standards Board (IASB) adopted IAS 35 – Discontinuing Operations
March 2004	The IASB issued IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations replacing IAS 35
January 2005	Annual periods beginning on or after 1st January 2005

Key Provisions of IFRS 5

1. For Held-for-Sale Assets:

Measured at lower of carrying amount or fair value less costs to sell
Depreciation stops
Shown separately on the balance sheet

2. For Discontinued Operations:

Presented separately in the income statement
Includes income, expenses, and gains/losses, net of tax

Scope of IFRS 5

Applies To:

Non-Current Assets (or disposal groups) held for sale
Discontinued operations

Does Not Apply To:

Deferred tax assets (IAS 12)
Financial instruments (IFRS 9)
Biological assets (IAS 41)
Investment property at fair value (IAS 40)
Insurance contracts (IFRS 17)
Employee benefits (IAS 19)

Disclosure Requirements

IFRS 5 requires entities to make specific disclosures in the financial statements to provide transparency and allow users of financial statements to assess the financial effects of asset disposal.

1. Non-Current Assets Held for Sale

Entities must disclose:

A description of the non-current asset or disposal group
The facts and circumstances of the sale, including the expected manner and timing
The gain or loss recognized in accordance with paragraph 37
If applicable, the segment in which the non-current asset or disposal group is presented
Impairment losses and reversals, if any, recognized on the reclassification as held for sale
An explanation if the asset or disposal group has not been sold within 12 months and the reasons for the delay

2. Discontinued Operations

Entities must disclose:

A description of the discontinued operation
The facts and circumstances leading to the disposal or classification as held for sale
The profit or loss from discontinued operations, including: Revenue, expenses, and pre-tax profit or loss
Related income tax expense
Gain or loss on disposal
Net cash flows attributable to operating, investing, and financing activities of discontinued operations
If applicable, adjustments made in prior periods to amounts disclosed for discontinued operations

Why IFRS 5 Replaced IAS 35

IAS 35 – Discontinuing Operations was replaced by IFRS 5 because:

Narrow Scope:

IAS 35 focused only on “discontinuing operations,“ not addressing non-current assets held for sale.

Lack of Measurement Criteria:

IAS 35 didn’t define how to measure non-current assets intended for sale.

Inconsistent Disclosures:

IAS 35 lacked comprehensive disclosure requirements, reducing comparability across financial statements.

Comparability Issues:

IFRS 5 introduced clearer classification rules and simplified application.

Key Improvements Introduced by IFRS 5:

IFRS 5 Introduced the concept of “held for sale”
It required measurement at the lower of carrying amount and fair value less costs to sell
Enhanced transparency with detailed disclosure requirements
IFRS 5 required separate presentation of discontinued operations in the income statement

FAQs on IFRS 5

1. Can assets held for sale be depreciated?

No. Depreciation ceases once an asset is classified as held for sale.

2. What happens if a reclassified asset is not sold within 12 months?

If not sold within a year, and the conditions for “held for sale“ classification are no longer met, the asset must be reclassified and re-measured accordingly.

3. Is revaluation allowed under IFRS 5?

No. IFRS 5 does not permit upward revaluation. Only impairment losses or gains on remeasurement to fair value less costs to sell are recognized.

4. How are discontinued operations shown?

They are presented as a single amount on the face of the income statement, net of tax, with a detailed breakdown in the notes.

Conclusion

IFRS 5 ensures that the users of an entity’s financial statements are presented with relevant, timely information about non-current assets and discontinued operations.

It enhances transparency and comparability – key to informed decision-making.

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Disclaimer

This article is for general information only and does not constitute professional advice. For tailored solutions, consult your accountant or get in touch with Mugo & Co.