NON-CURRENT ASSETS HELD FOR SALE - the why and the wherefore

NON-CURRENT ASSETS HELD FOR SALE Revenue for the sale of goods can only be recognised if ……. the entity has transferred … ownership … AND the entity retains neither … managerial involvement … nor effective control … AND the amount of revenue can be measured reliably … AND it is probable the [amount will be received] … AND the costs … can be measured reliably ALL MUST BE SATISFIED AASB

NON-CURRENT ASSETS HELD FOR SALE But what if an entity knows that it will dispose of an asset in the next period, but it doesnt yet meet the requirements of AASB 118? If it cant recognise the revenue, it cant recognise the costs - - unless another Standard applies

NON-CURRENT ASSETS HELD FOR SALE Financial InstrumentsAASB 139FAIR VALUE Other ReceivablesAASB 136 Provision for Impairment (Allowance for Doubtful Debts) InventoriesAASB 102 Lower of cost or net realisable value Investment PropertyAASB 140FAIR VALUE Other Non-current Assets (including Discontinued Operations) AASB 5

NON-CURRENT ASSETS HELD FOR SALE 15 An entity shall measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell. Thus AASB 5 requires early recognition of losses, but does not permit early recognition of profits.

NON-CURRENT ASSETS HELD FOR SALE Accounting entries: DRNon-Current Assets held for sale DRAccumulated Depreciation DR(Anticipated) Loss on disposal CRInfrastructure, Property, Plant & Equipment At lower of cost and net realisable value Carrying value Separately shown in P&L From the date of transfer NO MORE DEPRECIATION NO MORE REVALUATIONS The asset is literally removed from your Asset Register, and recorded separately.

NON-CURRENT ASSETS HELD FOR SALE For AASB 5 to apply, you must be able to make a realistic estimate of the sale proceeds. 6 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 sale transaction rather than through continuing use. 7 For this to be the case, 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 its sale must be highly probable. The emphasis is in the Standard

NON-CURRENT ASSETS HELD FOR SALE 8 For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value. an active program to locate a buyer and complete the plan must have been initiated. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification,...

NON-CURRENT ASSETS HELD FOR SALE Mere Council resolution that it intends to sell is NOT ENOUGH. In practical terms, you need an enforceable contract for sale by the time of audit. If in doubt, discuss it with your Auditor early.

NON-CURRENT ASSETS HELD FOR SALE Technically, AASB 5 also applies to the trade-in of plant, etc. 10 Sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance in accordance with AASB 116 Property, Plant and Equipment. However, provided the loss on disposal is NOT MATERIAL, your Auditor will usually accept this being managed through your Plant Register, and certainly it is more convenient to do so.

NON-CURRENT ASSETS HELD FOR SALE DISCLOSURES There are plenty - and, because every such sale is different, the Model Statements cannot provide comprehensive examples. Refer to AASB 5 paragraphs

NON-CURRENT ASSETS HELD FOR SALE GOOD DISCLOSURE

NON-CURRENT ASSETS HELD FOR SALE GOODNESS GRACIOUS!!

NON-CURRENT ASSETS HELD FOR SALE DONT SHOW If you havent got any, DONT SHOW the subtotal in current assets, or the empty line item the subtotal in current liabilities, or liabilities relating to non-current assets held for sale anything for discontinued operations in P&L

NON-CURRENT ASSETS HELD FOR SALE It has been in the Model Statements: Page 9 and pages 124, 125, 126. The explanations contained in the Model Statements are as important as the presentation examples.

NON-CURRENT ASSETS HELD FOR SALE - the why and the wherefore