MFRS 5 Notes on Non-Current Assets Held for Sale and Discontinued Operations
Scope and application
The classification and presentation requirements of this MFRS apply to all recognised non-current assets and to all disposal groups of an entity. The measurement requirements apply to all recognised non-current assets and disposal groups, except for those assets listed in paragraph 5 which shall continue to be measured under their respective standards.
Assets classified as non-current under MFRS 101 (Presentation of Financial Statements) shall not be reclassified as current assets until they meet the criteria to be classified as held for sale under MFRS 5.
Assets normally regarded as non-current that are acquired exclusively with a view to resale shall not be classified as current unless they meet the criteria to be held for sale under this MFRS.
Classification and criteria for NCAHFS (held for sale) and related measurement
An asset (or disposal group) shall be classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The asset (or disposal group) 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 the sale must be highly probable.
Availability for immediate sale requires:
The asset (or disposal group) to be available for immediate sale in its present condition,
The sale to be highly probable.
Measurement on initial recognition:
Measured at the lower of Carrying Value (CV) and Fair Value Less Costs to Sell (FVLCTS):
Depreciation/amortisation and other carrying amounts are halted after reclassification to NCAHFS and up to the date of reclassification.
Impairment treatment when applicable:
If Carrying Amount (CA) > Fair Value (or more precisely CA > FVLCTS on the date of recognition), the difference is recognised as an impairment loss. For NCAHFS, the relevant comparison is CA vs FVLCTS, not CA vs FV.
Impairment loss example: if ext{CA} > ext{FVLCTS}, then impairment loss = and is recognised in the SOPL until reclassification is completed.
Presentation: NCAHFS are presented separately from other non-current assets in the balance sheet and in the notes.
Criteria for classification (1) Available for immediate sale and (2) Sale must be highly probable
Criteria for classification as NCAHFS include two main conditions:
1) Available for immediate sale
2) Sale must be highly probableFor high probability, the following indicators are typically considered:
Appropriate level of management committed to a plan to sell the asset
An active programme to locate a buyer and complete the plan
The asset is actively marketed for sale at a price reasonable in relation to its current fair value
The sale is expected to qualify as a completed sale within one year from the date of classification (with exceptions as per para 9)
Actions to complete the plan indicate that it is unlikely significant changes will be made or that the plan will be withdrawn
The sale is expected to obtain shareholder approval within one year
There is an exception to the one-year rule for cases beyond the entity’s control (i.e., events beyond management’s control may extend the period to complete the sale)
Exception to the one-year rule
An exception to the one-year requirement exists when external factors (e.g., regulatory approvals) may extend the period required to complete the sale.
If a firm purchase commitment is expected to be obtained within one year, and other conditions for “highly probable” are met, the asset may still be classified as NCAHFS despite the potential for a longer regulatory process.
Example (from notes): PQR Group BHD can treat a sale as NCAHFS if a firm purchase commitment is expected within one year, even if regulatory approvals may extend the overall timeline beyond one year.
Example 23 (classification criteria assessment)
(a) The manufacturing plant is available for sale in its present condition. Any uncompleted customer orders at the date of sale will transfer to the buyer and will not affect the timing of the transfer of the facility. Therefore, the criteria for held-for-sale classification are met.
(b) If the facility can only be transferred after all operations cease and backlog is cleared, the terms are not usual and customary; hence the asset would not meet classification criteria until operations cease. The held-for-sale criteria would not be met until that point, even if a firm purchase commitment exists earlier.
Example 25: impairment measurement before classification (illustrative)
Under a disposal-group scenario, the fair value less costs to sell (FVLCCTS) is computed and compared to the carrying amount to determine impairment at the date of classification.
Given data (illustrative): FVLCCTS = RM 601.7 million; impairment allocation follows MFRS 136 guidance (allocation to assets within the disposal group is covered in the next topic).
Notes: FVLCCTS is used for subsequent measurement and impairment assessment after initial recognition.
Result: The difference between CA and FVLCCTS on the classification date determines impairment, with subsequent measurement adhering to the lower of CA and FVLCCTS.
Example 27: impairment and reversal (illustrative)
(a) On 30 April 20x9, classification as held for sale occurs with CA = RM 300 million, FVLCCTS = RM 280 million. Impairment loss on classification = RM 20 million (the lower of CA and FVLCCTS). Carrying amount of the asset held for sale becomes RM 280 million.
(b) On 31 December 20x9, FVLCCTS increases to RM 350 million while the asset is still classified as held for sale and CA is RM 280 million. Reversal of impairment is allowed but limited to the total accumulated impairment recognised under MFRS 136 and MFRS 5 (here, RM 60 million in total). Reversal recognised in SOPL (not in OCI). New carrying amount becomes RM 340 million (RM 400 million cost less RM 60 million accumulated depreciation and RM 0 impairment at that date, adjusted as per the example).
Journal (illustrative):
On 30 Apr 20x9: Dr Property held for sale RM 0? (Impairment) [example shows entry for impairment], Dr Reversal of impairment RM 0, Cr Reversal? The key point is recognizing impairment at classification if FVLCCTS < CA.
On 31 Dec 20x9: Dr Property held for sale RM 60,000,000; Cr Reversal of impairment RM 60,000,000.
Changes to a plan of sale
It is possible that an entity may change its plan to sell after classification due to events beyond control.
If the plan changes, the asset shall cease to be classified as held for sale. The measurement shall be at the lower of:
its carrying amount just before classification (adjusted for any depreciation, amortisation, or revaluations that would have been recognised had the asset not been classified as held for sale), and
its recoverable amount at the date of the subsequent decision not to sell.
Example (illustrative): journal entries may include reclassification and reversal of impairment where applicable; the reversal recognised in SOPL from continuing operation. An asset reclassified to PPE is measured at a carrying amount such as RM 380 million in the example (cost RM 500 million, accumulated depreciation RM 110 million, accumulated impairment RM 10 million).
Journal example: Dr Acc impairment loss RM 40 million; Cr Acc depreciation RM 10 million; Cr Reversal of impairment RM 30 million.
The reversal is recognised in the SOPL from continuing operations; the asset is reclassified to PPE.
Disclosures (paragraphs 31–42)
In consolidated financial statements, disclosures follow the structure shown in practice examples (balance sheet and notes):
Assets held for sale (separately presented within non-current assets or as a disposal group if applicable)
Liabilities held for sale (separately presented within current or non-current liabilities as appropriate)
Note disclosures include the basis for classification, impairment considerations, and any reversals or changes in plan.
Example disclosure format (illustrative):
Consolidated balance sheet (selected line items):
Non-current assets: Goodwill, Intangible assets, PPE, Pension asset, Deferred tax assets, Financial assets, Other non-current assets, and Assets held for sale (separately disclosed)
Current assets: Inventories, Trade and other receivables, Current tax assets, Cash and cash equivalents, Other financial assets, Assets held for sale
Liabilities: Current liabilities, Financial liabilities, Trade payables and other current liabilities, Current tax liabilities, Provisions, Liabilities held for sale
Note references: para 31–42; example shows alignment with standard practice (e.g., Unilever plc notes).
Practical implications and key takeaways
NCAHFS requires reclassification only when the asset is available for immediate sale and there is a highly probable plan to sell within the targeted timeframe (generally one year, with permitted extensions under certain circumstances).
Measurement on reclassification is at the lower of CV and FVLCTS; depreciation is stopped up to the date of reclassification.
If the plan changes, the asset ceases to be held for sale and is measured at the lower of its carrying amount (adjusted for depreciation, amortisation, or revaluations that would have occurred) and its recoverable amount at the date of the decision not to sell.
Impairment losses (and reversals) follow MFRS 5 and MFRS 136 guidelines, with reversals limited by the total cumulative impairment recognised.
Abandoned assets are generally not classified as NCAHFS unless they meet criteria for discontinued operations; temporarily mothballed assets remain PPE and follow other relevant standards (MFRS 116, MFRS 136).
Disclosures emphasize separate presentation of assets and liabilities held for sale and the ongoing impact on the statements of financial position and performance.