If (C) < (B) Further, assets of a class that an entity would normally regard as non-current and are acquired exclusively with a view to resale are not classified as current unless they meet the criteria to be classified as held for sale in accordance with the IFRS. RECOGNITION AND MEASUREMENT . Step 1: Test for recoverability Long-lived assets held for sale Under US GAAP, assets are classified as held for sale when the criteria under FAS 144 ‘Accounting for the impairment or disposal of long-lived assets’ are AR6470 IHG Notice of Meeting 2005 11/03/2005 Sign off proof £ £££$ $$$ £ £££$ $$$ www.ihgplc.com . 2. Many long-lived assets which a company owns are specialized in nature and they can’t be sold over-night. Official positions of the FASB are determined only after extensive due process and deliberations. --> adjusts the carrying amount of the asset (D) sum of "undiscounted" cash flows from the asset FRS 102 does not have a similar concept to IFRS of assets being classified as ‘held for sale’. Presented separately in the statement of financial position 2. Impairment test UK GAAP (FRS 101): A single line presentation of non-current assets (or liabilities) held for sale will not usually meet company law requirements. In general, the following conditions must be met for an asset (or 'disposal group') to be classified as held for sale: [IFRS 5.6-8] management is committed to a plan to sell; the asset is available for immediate sale; an active programme to locate a buyer is initiated; the sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions) Property, Plant and Equipment Where an entity intends to sell a tangible fixed asset in the near future, the asset should continue to be held in fixed assets in the balance sheet unless that asset is being transferred to stock for sale in the ordinary course of the company’s business. Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. GAAP Consolidation — Identifying a Controlling Financial Interest Contingencies and Loss Recoveries Contracts on an Entity's Own Equity Convertible Debt Current Expected Credit Losses Disposals of Long-Lived Assets and Discontinued Operations … No comments: Post a Comment. ASSETS HELD FOR SALE Under UK GAAP there is no held for sale definition. Criteria for classifying as held for sale: For a non-current asset (or disposal group) to be classified as held for sale: the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups); and; its sale must be highly probable; a. Impairment loss 1. A business or nonprofit activity that, on acquisition, meets the criteria in paragraph 205-20-45-1E to be classified as held for sale also is a discontinued operation. Presented separately in the statement of financial position Criteria to Be Met. Held-for-sale classification. 61 Chapter 8: What about the investors? "Accounting for the Impairment or Disposal of Long-Lived Assets" The results of the US business are presented as discontinued and are shown separately from continuing operations. (E) fair value So, if you want to sell a CGU, then it’s both a disposal group (asset held for sale) and discontinued operation (by definition), and therefore you need to measure it at fair value less cost to sell + disclose … 3. Classification of non-current assets (or disposal groups) as held for sale or as held for distribution to owners An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a saletransaction rather than through continuing use. In theory, there is a wide range of potential points at which revenue can be recognized. During the construction period Labels: Asset Held for Sale. (2) component that is classified as "held for sale" 2. This guide addresses recognition principles for both IFRS and U.S. GAAP. Assets held for sale – on top of disclosures, you need to measure them at fair value less cost to sell. --> when there is a subsequent increase in fair value, Accounting Standards Codification, Topic 305: Cash and Cash Equivalents, ASC Codification IFRS 5 focuses on two main areas: 1. If an impairment loss is recognized The basics | 6. Before an asset or disposal group can be classified as held for sale, the following criteria must be met: Asset must be available for immediate sale. U.S. GAAP Codification of Accounting Standards, U.S. GAAP Accounting Standards The price of the building has been fixed at $4m and a surveyor has valued the building based on market prices at $3.6m. --> certain interest costs are also capitalized The entity will continue to use the building until another building has been found with equivalent facilities, and in a suitable location for the office staff, who will not be relocated until the new building has been found. Additionally, the entity is planning to sell part of its b… Accounting for Partial Sales—Under ASC 360 and ASC 970, a sale is considered a partial sale if the seller retains an equity interest in the property (or the buyer). When held for sale criteria are no longer met: When an asset or disposal group has been classified as held for sale, but the held for sale criteria are no longer met, the asset or disposal group should be removed from the held for sale category. US GAAP versus IFRS. In this guide, we provide an overview, by accounting area, of the similarities and differences between US GAAP and IFRS. Long-lived assets to be 'held and used" are Available for immediate sale in its present condition: An entity has agreed in a directors’ meeting to sell a building, and has tentatively started looking for a buyer for the building. Impairment of long-lived assets The seller does not have control over the goods sold. --> if (D) < (B) [FRS 101 para A2.10A]. Among other things, those criteria specify that (a) the asset must be available for immediate sale in its present condition subject only to terms that are usual and … zNon-current assets (and disposal groups) held for sale generally are measured at the lower of carrying amount and fair value less costs to sell and are disclosed separately on the face of the balance sheet. “held for sale”, (HFS) and the “presentation and disclosure for discontinued operations”. (B) carrying amount When management decided to put Tayto on the market, it would be a disposal group held for sale. Posted by hardi at Tuesday, November 02, 2010. All rights reserved. Discontinued operations A business or nonprofit activity that, on acquisition, meets the criteria in paragraph 205-20-45-1E to be classified as held for sale also is a discontinued operation. Measured at cost Chapter 3: Does my securitization meet the sale criteria under GAAP? ASSETS HELD FOR SALE Under UK GAAP there is no held for sale definition. 1. In many cases, it takes months since the date the company decides … zAssets classified as held for sale are not amortised or depreciated. Those Board decisions are tentative and do not change current accounting. 21 Chapter 4: How do securitizations fare under IFRS? Measured at the lower of (B) and (C) (B) carrying amount (C) fair value less cost to sell 4. Adjusted EBITDA, a non-GAAP measure, was $366 million, up 18.4%, and up 14.8% on an OCC basis. Overview, ASC Codification BDO’S US GAAP AND IFRS COMPARISON SERIES JUNE 2020 / www.bdo.com INTRODUCTION Guidance related to assessing and recording impairment of assets is found in IAS 36, Impairment of Assets and in IFRS 5, Non-current Assets Held for Sale and Discontinued Operations for entities complying with international accounting standards, and in ASC 350, Intangibles – Goodwill and Other … Criteria to Be Met. SFAS 144, August 2001 Let’s talk through some additional considerations on a few of them. 1. 3.3 Held-for-Sale Criteria 55 3.3.1 Management, Having the Authority to Approve the Action, Commits to a Plan 55 3.3.2 Available for Immediate Sale in Its Present Condition 56 3.3.3 An Active Program to Locate a Buyer and Other Actions Required to Complete the Plan Have Been Initiated 58 Assets held for sale – on top of disclosures, you need to measure them at fair value less cost to sell. 31 Chapter 5: How about some examples? Long-lived assets to be held and used Long-lived assets "held for sale" 1. The collection of paymentSales and Collection CycleThe Sales and Collection Cycle, also known as the revenue, receivables, and receipts (RRR) cycle, comprises of various classes of transactions. 6. --> a loss is recognized Cost includes (A) Impairment and disposal of long-lived assets Project … 7. Disposal of long-lived assets “held for sale”, (HFS) and the “presentation and disclosure for discontinued operations”. Discontinued_operations_slides - Discontinued operations... School San Beda College Manila - (Mendiola, Manila) Course Title CAS BSA; Type. So, the cash flows or the royalty is indirect, and therefore, it must classify the product lines as discontinued operations. zAssets classified as held for sale are not amortised or depreciated. Additional disaggregation should be provided in the statement of financial position (if material) or in the notes. 1. Impairment loss = (B) - (E) Discontinued_operations_slides - Discontinued operations Typical coverage of US GAAP Criteria for classification as non-current assets held for sale. they meet the criteria to be classified as held for sale in accordance with the IFRS. A businessor nonprofit activitythat, on acquisition, is classified as held for sale. Old UK GAAP and new UK GAAP (FRS 102): Assets held for sale are not covered; the decision to sell an asset is considered an impairment indicator. The item you requested could not be found. If the criteria are met after the reporting date but before the financial statements are authorized for issue, various disclosures are triggered (see below). 1. Property, Plant and Equipment, Codification Topic 360 US GAAP, as promulgated by the Financial Accounting Standards Board (FASB), and IFRS, as promulgated by the International Accounting Standards Board (IASB) (collectively, the Boards). (1) component that has been disposed of 1. The conditions for a non-current asset or disposal group to be classified as held-for-sale are as follows: the assets must be available for immediate sale in their present condition and its sale must be highly probable the asset must be currently marketed actively at a price that is reasonable in relation to its current fair value Chapter 3: Does my securitization meet the sale criteria under GAAP? If the criteria are met after the reporting date but before the financial statements are authorized for issue, various disclosures are triggered (see below). Neither model allows the capitalization of start-up costs, general administrative and overhead costs or regular maintenance. 3.3 Held-for-Sale Criteria 55 3.3.1 Management, Having the Authority to Approve the Action, Commits to a Plan 55 3.3.2 Available for Immediate Sale in Its Present Condition 56 3.3.3 An Active Program to Locate a Buyer and Other Actions Required to Complete the Plan Have Been Initiated 58 When management decided to put Tayto on the market, it would be a disposal group held for sale. If (B) > (C) Net income was $186 million, up 466% for the third quarter of 2020. 1. Topic 340: Other Assets and Deferred Costs, ASC Codification Topic 350: Intangibles-Goodwill and Other, ASC Codification According to the IFRS criteria, for revenue to be recognized, the following conditions must be satisfied: 1. 31 Chapter 5: How about some examples? 45 Chapter 6: How do you determine gain or loss on a sale? 3 . Both accounting models have similar recognition criteria, requiring that costs be included in the cost of the asset if future economic benefits are probable and can be reliably measured. At the time the decision is made, a formal marketing strategy or Where an entity intends to sell a tangible fixed asset in the near future, the asset should continue to be held in fixed assets in the balance sheet unless that asset is being transferred to stock for sale in the ordinary course of the company’s business. FAS 144—Measuring Assets Held for Sale Last Updated: May 23, 2008 (Updated sections are indicated with an asterisk *) The staff has prepared this summary of Board decisions for information purposes only. Therefore, IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations was issued to highlight the results from continued operations and to separate them from the results of the ongoing activities. 3. They are carried on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them. The results of operations of (1) and (2) are 2. (A) all costs necessary to make the asset ready for intended use Long-lived assets held for sale 2. Topic 310: Receivables, ASC Codification A gain or loss An asset is impaired when (E) < (B) 205-10-05-3A If a component of an entity that either has been disposed of or is classified as held for sale does not meet the conditions to be reported in discontinued operations, Section 360-10-45 on other Test Prep . In this case, XYZ will not have any continuing operational involvement in the product lines that it sold. Step 2: Measurement of impairment loss zNon-current assets (and disposal groups) held for sale generally are measured at the lower of carrying amount and fair value less costs to sell and are disclosed separately on the face of the balance sheet. Newer Post Older Post Home. 4. IFRS 5 came into effect on 1 January 2005. It sets the presentation and disclosure requirements for discontinued operations. Topic 325: Investments-Other, ASC Codification (B) carrying amount US GAAP IFRS . 5. Welcome to the Deloitte Accounting Research Tool (DART). The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration ("the agencies") have jointly issued the attached "Interagency Guidance on Certain Loans Held for Sale." For discontinued operation – you do disclose it separately in both P/L and balance sheet. IFRS 5 requires: IFRS 5 requires: assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease; and Subsequent measurement of property, plant and equipment Topic 323: Investments-Equity Method and Joint Ventures, ASC Codification 2. 55 Chapter 7: What should I know about mortgage servicing rights? 3 . --> if Step 1 shows that carrying amount is not recoverable Newly acquired long-lived assets held for sale Similarly to IFRS, a company is allowed to report discontinued operations under GAAP when two criteria are met. An asset is not depreciated while classified as "held for sale" 3. A non-current asset (or disposal group) is classified as ‘held for sale’ if its carrying amount is recovered principally through a sale transaction rather than through continuing use. Non-current assets held for sale and discontinued operations EY, International GAAP 2020 (2020) The latest edition of this comprehensive guide offers a global perspective and explanations of complex technical accounting issues to help practitioners interpret and implement IFRS. (C) fair value less cost to sell For a non-current asset or disposal group to be classified as held for sale, the relevant criteria must be met before the reporting date. --> when there is an indication that carrying amount may not be recoverable 3. So, if you want to sell a CGU, then it’s both a disposal group (asset held for sale) and discontinued operation (by definition), and therefore you need to measure it at fair value less cost to sell + disclose it separately in your P/L … consistent with generally accepted accounting principle (GAAP). 2. Under US GAAP, assets are classified as held for sale when the criteria under FAS 144 ‘Accounting for the impairment or disposal of long-lived assets’ are AR6470 IHG Notice of Meeting 2005 11/03/2005 Sign off proof £ £££$ $$$ £ £££$ $$$ www.ihgplc.com . (B) carrying amount Establishes criteria beyond that previously specified in Statement 121 to determine when a long-lived asset is held for sale, including a group of assets and liabilities that represents the unit of accounting for a long-lived asset classified as held for sale. FAS 144—Measuring Assets Held for Sale Last Updated: May 23, 2008 (Updated sections are indicated with an asterisk *) The staff has prepared this summary of Board decisions for information purposes only. Non-current assets held for sale and discontinued operations EY, International GAAP 2020 (2020) The latest edition of this comprehensive guide offers a global perspective and explanations of complex technical accounting issues to help practitioners interpret and implement IFRS. Held for sale – definition A non-current asset or disposal group (a group of assets to be disposed of together) is classified as held-for-sale when the following criteria are met: • Dispose of together in a single transaction • Its carrying amount will be recovered principally through a sale transaction: – Available for immediate sale in Carrying amount is not recoverable There are six criteria to achieve held for sale accounting. Topic 320: Investments-Debt and Equity Securities, ASC Codification Before an asset or disposal group can be classified as held for sale, the following criteria must be met: Asset must be available for immediate sale. 3. Official positions of the FASB are determined only after extensive due process and deliberations. The criteria for GAAP require that firstly, the transaction used to shut down the divested business will eliminate the operations and cash flow of the … Held for sale assets are long -lived assets for which a company has a concrete plan to dispose of the asset by sale. --> tested for impairment To proceed, try a search or browse the library, or select one of the following options: Copyright © 2020 Deloitte Development LLC. meets the criteria to be classified as held for sale or has been abandoned or spun-off and (b) represents a strategic shift that has (or will A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale or for distribution to owners, and that meets any of the following criteria: Codification Topic 360: In particular, the IFRS requires assets that meet the criteria to be classified as held for sale to be: (a) measured at the lower of carrying amount and fair value less … 2. --> adjusted carrying amount becomes "new cost basis" 45 Chapter 6: How do you determine gain or loss on a sale? On the first item, management commits to a plan, there needs to be specificity to the plan. 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