Presentation and Disclosure
Under IFRS 5 ‘An entity shall present and disclose information that enables users of the financial statements to evaluate the financial effects of discontinued operations and disposals of non-current assets (or disposal groups)’.
Non-current assets classified as held for sale must be disclosed separately from other assets in the statement of financial position.
This allows users of the financial statements to make their own assessments about the future prospects for the entity.
Also, assets and liabilities that are part of a disposal group held for sale must be disclosed separately from other assets and liabilities in the statement of financial position.
They should not be offset or combined into a single line item.
A discontinued operation is a component of an entity that has been disposed of, or classified as “held for sale”.
A discontinued operation:
- Represents a separate major line of business or geographical area of operations,
- Is part of a single co-ordinated plan to dispose of a separate major line of businesses or geographical area of operations, or
- Is a subsidiary acquired exclusively with a view to resale.
An example of the subsidiary acquired with a view to resale happened a few years ago when Communicorp, the owner of 98FM and Spin 1038, bought EMAP’s radio holdings in Ireland.
They wanted to buy Today FM, EMAP’s biggest station.
As part of the deal they also ended up buying FM104 in Dublin and Highland Radio in Donegal.
The government insisted they sell FM104 and Highland Radio as soon as possible if the deal was to be allowed.
If you looked at the accounts of Communicorp, they would most likely show those two stations as discontinued operations for that year.
NB. 1 Non-current assets classified as “held for sale” and the assets of a disposal group classified as “held for sale” must be disclosed separately from other assets in the statement of financial position.
NB. 2 If those assets comprise a “disposal group” the assets and the liabilities of the group must be disclosed separately either in the notes or on the face of the statement of financial position.
Income Statement Disclosure
Information about discontinued operations (both discontinued and “held for sale”) must be presented in the statement of comprehensive income or in a note to the financial statements.
There must be a single amount on the face of the statement of comprehensive income (or income statement) for the total of:
- the post-tax profit or loss for the period from the discontinued operations, and
- the post-tax gain or loss on disposal (based on the fair value minus costs to sell of the asset or disposal group).
The total amount should be analysed by:
- the revenue, expenses and pre-tax profit for the period from the discontinued operations
- the related tax charge (under IAS 12 – Income Taxes)
- the gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group constituting the discontinued operations.
This analysis may be contained in the notes or on the face of the statement of profit or loss and other comprehensive income.
When presented in the statement of profit or loss and other comprehensive income, it shall be presented in a separate section identified as discontinued operations, which is separate from continuing operations.
The comparative figures for the previous financial period should be re-presented, so the disclosures relating to discontinued operations in the prior period relate to all discontinued operations up to the current period.
Cash Flow Disclosures
Discontinued operations should also be shown as a separate line item on the statement of cash flows.
This will be allocated to the relevant category, whether operating, investing or financing in the statement of cash flows.
These disclosures may be presented either on the face of the statement of cash flows or in the notes to the financial statements.
5 Additional Disclosures
An entity should disclose the following information in the notes of the financial statements in which an asset or disposal group has been sold or classified as “held for sale”:
- a description of the non-current asset or disposal group
- a description of the facts and circumstances of the sale
- in the case of operations and non-current assets ‘held for sale’, a description of the facts and circumstances leading to the expected disposal and the expected manner and timing of the disposal.
- Any gain or loss recognised in accordance with IAS 36 – Impairment of Assets
- The segment in which the assets or disposal group belongs (if applicable) under IFRS 1 – Operating Segments
Although you re-present the discontinued operations performance figures in the previous statement of comprehensive income, you don’t do that in the statement of financial position.
There’s no need to identify the discontinued operations as a separate line item in the previous year.