2. 1 LACPA – Roger Nasr July 6, 2006 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

3. 2 Main Content of IFRS 5 Definition of a discontinued operation Very much the same as the definition in IAS 35 Timing of classification as a discontinued operation When the discontinued operation is disposed of or meets held for sale criteria Non-current assets / disposal groups held for sale Write down to fair value less costs to sell Depreciation not permitted. Presented separately in the balance sheet Results and cash flows of discontinued operations Presented separately in the income and cash flow statements

4. Held for sale classification.

5. 4Scope n The classification and presentation requirements apply to all recognised non-current assets and to all disposal groups Disposal group – n A group of assets and associated liabilities to be disposed of, by sale or otherwise, as a group in a single transaction n Includes goodwill acquired in a business combination if the group is a CGU to which goodwill was assigned (IAS 36)

6. 5 Held for Sale Classification n Held for sale criteria (para 7,8) (para 7,8) Available for immediate sale in present condition Management is committed to a plan to sell The sale is highly probable Active program to locate a buyer initiated Sale generally expected within 12 months Actively marketed at a reasonable price Requirements to complete indicate plan wont alter AND

7. 6 Selected cases Type of Transaction Held for Sale? Reason Subsidiary to subsidiary No Control remains Subsidiary to associate Yes Control lost Subsidiary to equity- accounted JV Yes Control lost Subsidiary to proportionately consolidated JV Yes Control lost Subsidiary to investment Yes Control lost Proportionately consolidated JV to associate Yes Joint control lost Equity accounted JV to equity accounted JV No Joint control remains

8. 7 Selected cases Type of Transaction Held for Sale? Reason Equity-accounted JV to equity- accounted associate No Joint control lost but method of accounting implies no change in nature of holding Proportionately consolidated JV to Investment Yes Joint control lost Proportionately consolidated JV to proportionately consolidated JV No Joint control remains Equity-accounted JV to Investment Yes Joint control lost Associate to investment Yes Significant influence lost Associate to associate No Significant influence remains

9. Presentation and Disclosure.

10. 9 Discontinued Operations n Discontinued operation ** Component ** of an entity that has been disposed of represents a separate major line of business or geographical area of operations, or Classified as held for sale part of single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale OR AND **Operations & cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from rest of entity **Operations & cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from rest of entity

11. 10 Presentation and Disclosure – Discontinued Operations n A single amount on face of the income statement comprising total of –Post-tax profit or loss of the discontinued operation and –Post-tax gain or loss recognised on the measurement to fair value less costs to sell or on disposal n An analysis of that amount on face or in the notes into –Revenue, expenses and pre-tax profit or loss of discontinued operations and the related income tax expense –Gain or loss recognised on measurement to fair value less costs to sell or on disposal of the assets or disposal group(s) constituting the discontinued operation and the related income tax expense

12. 11 Income Statement - Function Continuing Operations20052004 Continuing Operations20052004 Revenue XX Cost of sales(X)(X) Gross profitXX Other operating incomeXX Distribution costs(X)(X) Administrative expenses(X)(X) Other operating expenses(X)(X) Finance costs (X)(X) Share of profit of associateXX __________ Profit before tax XX Income tax expense (X)(X) __________ Profit for the period from continuing operationsXX Discontinued Operations Profit/ (loss) for the period from discontinued operations X(X) __________ Profit for the periodAB __________ Attributable to : Equity holders of the parent ac Equity holders of the parent ac Minority interest bd Minority interest bd __________ AB __________

13. 12 Presentation and Disclosure – Discontinued Operations n As a result of this disclosure requirement, income statement is divided into two sections –Continuing operations –Discontinuing operations

14. 13 Presentation and Disclosure – Discontinued Operations n Various standards require disclosure of totals for entity as a whole for components of income and expense –The disclosures pre-date IFRS 5 n IFRS 5 splits the income statement and detail presented on the face relates to continuing operations n One solution - present analyses of these items between continuing and discontinuing operations in notes, and a total for the entity as a whole

15. 14 Income Tax Disclosure

16. 15 Presentation and Disclosure – Held for Sale n Non-current assets (or the assets of a disposal group) are shown separately from other assets n The liabilities of the disposal group shall be presented separately from other liabilities n Assets and liabilities shall not be offset n Major classes of assets and liabilities disclosed separately either on balance sheet or notes –Exemption for newly acquired subsidiaries n Prior periods are not reclassified

17. 16 Balance Sheet - Assets Non-current assets 20052004 Non-current assets 20052004 Goodwill XX Other intangible assetsXX Property, plant and equipmentXX Available for sale investments XX Finance lease receivablesXX __________ X X Current assets__________ Inventories XX Finance lease receivablesXX Trade and other receivablesXX Cash and cash equivalentsXX __________ XX Non-current assets classified as held for saleXX __________ __________ XX __________ Total assets XX __________

18. 17 Balance Sheet - Liabilities Current liabilities 20052004 Current liabilities 20052004 Trade and other payables XX Retirement benefit obligationXX Tax liabilitiesXX Bank overdrafts and loansXX __________ X X Non-current liabilities__________ Bank loans XX Retirement benefit obligationXX Deferred tax liabilitiesXX Long-term provisionsXX __________ X X Liabilities directly associated with non-current assets classified as held for saleXX __________ __________ XX __________ Total liabilitiesXX __________ Net assetsXX __________

19. 18 Presentation and Disclosure – Held for Sale n Ensure IFRS 5 does not adversely affect compliance with disclosure requirements in other standards –Eg IAS 1 requires the disclosure of total inventory on face of balance sheet n When inventory is reclassified as held for sale and presented with other assets in a disposal group on the face, this requirement cannot be met n Suggestion - to meet this requirement and IAS 2.36(b), the following analysis could be provided in the notes

20. 19 Presentation and Disclosure – Inventories

21. Questions