Impairment test US GAAP versus IFRS. Presented separately in the statement of financial position 2. Any subsequent increase in the disposal group’s fair value, less cost to sell, should be recognized, but not in excess of … The entity has the ability and intention to transfer the asset to a purchaser in its current condition. Project … ASC, Initial measurement of property, plant and equipment 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. Discontinued_operations_slides - Discontinued operations Typical coverage of US GAAP Criteria for classification as non-current assets held for sale. 1. Subsequent measurement of property, plant and equipment 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. The guidance related to long-lived assets held for sale in U.S. GAAP is included in the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 360, Property, Plant, and Equipment, and the guidance related to discontinued operations is included in ASC 205-20, Presentation of Financial Statements –Discontinued Operations. So, the cash flows or the royalty is indirect, and therefore, it must classify the product lines as discontinued operations. Objective of IFRS 5. 21 Chapter 4: How do securitizations fare under IFRS? 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 … 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 … 31 Chapter 5: How about some examples? --> certain interest costs are also capitalized Discontinued operations are treated slightly differently under the Generally Accepted Accounting Principles (GAAP). Topic 305: Cash and Cash Equivalents, ASC Codification Assets held for sale – on top of disclosures, you need to measure them at fair value less cost to sell. (A) all costs necessary to make the asset ready for intended use 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 In many cases, it takes months since the date the company decides … 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. 21 Chapter 4: How do securitizations fare under IFRS? 45 Chapter 6: How do you determine gain or loss on a sale? An entity has agreed in a directors’ meeting to sell a building, and has tentatively started looking for a buyer for the building. Property, Plant and Equipment --> reported separately as discontinued operations 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 … No comments: Post a Comment. Codification Topic 360: 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. --> when there is an indication that carrying amount may not be recoverable Long-lived assets held for sale 3. 5. 1. Measured at the lower of (B) and (C) As stated in ‘Objective’, in particular, the IFRS 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 “held for sale”, (HFS) and the “presentation and disclosure for discontinued operations”. Disposal of long-lived assets A businessor nonprofit activitythat, on acquisition, is classified as held for sale. Impairment of long-lived assets 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. Topic 310: Receivables, ASC Codification 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) 4. 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. If the criteria are met after the reporting date but before the financial statements are authorized for issue, various disclosures are triggered (see below). Overview, ASC Codification Those Board decisions are tentative and do not change current accounting. --> if Step 1 shows that carrying amount is not recoverable 61 Chapter 8: What about the investors? Topic 320: Investments-Debt and Equity Securities, ASC Codification 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 Neither model allows the capitalization of start-up costs, general administrative and overhead costs or regular maintenance. Cost includes (A) 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). Topic 340: Other Assets and Deferred Costs, ASC Codification Topic 350: Intangibles-Goodwill and Other, ASC Codification (2) component that is classified as "held for sale" In theory, there is a wide range of potential points at which revenue can be recognized. If the criteria are met after the reporting date but before the financial statements are authorized for issue, various disclosures are triggered (see below). 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). [Footnotse 4, 5] TRANSFER TO HELD FOR SALE ACCOUNT When a decision is made to sell a loan or portion thereof that was not originated or initially acquired with the intent to sell, the loan should be clearly identified and transferred to the held-for-sale (HFS) account. During the construction period 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 3 . The sale agreement states that the buyer will pay XYZ a 5% royalty from the sale coming from these product lines for the next five years. Topic 360: Property, Plant, and Equipment. Adjusted EBITDA, a non-GAAP measure, was $366 million, up 18.4%, and up 14.8% on an OCC basis. (1) component that has been disposed of Held for sale assets are long -lived assets for which a company has a concrete plan to dispose of the asset by sale. 66 Chapter 9: How do I measure and report fair value … If an entity has classified an asset (or disposal group) as held for sale, but the criteria in paragraphs 7-9 are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale (paragraph 26 of IFRS 5) (Hrd). Step 2: Measurement of impairment loss 3. 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. 6. --> a gain is recognized up to "the cumulative loss" previously recognized The basics | 6. 2. 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. A long-lived asset or disposal group that meets the held-for- sale criteria should be reported at the lower of its carrying amount or fair value less cost to sell. Uploaded By President_Internet_Ape12. Held-for-sale classification. FASB Accounting Standards Codification Manual, SEC Rules & Regulations (Title 17 — Commodity and Securities Exchanges), Trust Services Principles, Criteria, and Illustrations, Principles and Criteria for XBRL-Formatted Information, Audit and Accounting Guides & Audit Risk Alerts, Other Publications, Press Releases, and Reports, Dbriefs Financial Reporting Presentations, Business Combinations — SEC Reporting Considerations, Consolidation — Identifying a Controlling Financial Interest, Contingencies, Loss Recoveries, and Guarantees, Environmental Obligations and Asset Retirement Obligations, Equity Method Investments and Joint Ventures, Equity Method Investees — SEC Reporting Considerations, Foreign Currency Transactions and Translations, Guarantees and Collateralizations — SEC Reporting Considerations, Impairments and Disposals of Long-Lived Assets and Discontinued Operations, Multiple-Element Arrangements — A Roadmap to Applying the Revenue Recognition Guidance in ASU 2009-13, Qualitative Goodwill Impairment Assessment — A Roadmap to Applying the Guidance in ASU 2011-08, SEC Comment Letter Considerations, Including Industry Insights, Software Revenue Recognition — A Roadmap to Applying ASC 985-605, Transfers and Servicing of Financial Assets, Roadmaps Currently Available Only as a PDF. Long-lived assets to be 'held and used" are Net income was $186 million, up 466% for the third quarter of 2020. --> a loss is recognized 2. consistent with generally accepted accounting principle (GAAP). they meet the criteria to be classified as held for sale in accordance with the IFRS. Before an asset or disposal group can be classified as held for sale, the following criteria must be met: Asset must be available for immediate sale. An asset is not depreciated while classified as "held for sale" 3. On the first item, management commits to a plan, there needs to be specificity to the plan. 1. The seller does not have control over the goods sold. The results of operations of (1) and (2) are 55 Chapter 7: What should I know about mortgage servicing rights? Available for immediate sale in its present condition: 3. So, if you want to sell a CGU, then it’s both a disposal group (asset held for sale) and discontinued operation (by definition), and therefore you need to measure it at fair value less cost to sell + disclose … The entity will continue to use the building until another building has been found with equivalent facilities, and in a suitable location for the office staff, who will not be relocated until the new building has been found. Under US GAAP, assets are classified as held for sale when the criteria under FAS 144 ‘Accounting for the impairment or disposal of long-lived assets’ are AR6470 IHG Notice of Meeting 2005 11/03/2005 Sign off proof £ £££$ $$$ £ £££$ $$$ www.ihgplc.com . At 28 September 2018, the disposal of Greencore’s US business met the recognition criteria under IFRS 5 Non-current assets held for sale and discontinued operations. (B) carrying amount (D) sum of "undiscounted" cash flows from the asset Let’s talk through some additional considerations on a few of them. 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 … (B) carrying amount Impairment loss is "not" reversed Impairment loss is not reversed Discontinued operations 1. This guide addresses recognition principles for both IFRS and U.S. GAAP. 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 . Measured at cost 7. Topic 325: Investments-Other, ASC Codification 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. --> adjusts the carrying amount of the asset When management decided to put Tayto on the market, it would be a disposal group held for sale. For discontinued operation – you do disclose it separately in both P/L and balance sheet. UK GAAP (FRS 101): A single line presentation of non-current assets (or liabilities) held for sale will not usually meet company law requirements. For discontinued operation – you do disclose it separately in both P/L and balance sheet. A gain or loss Labels: Asset Held for Sale. "Accounting for the Impairment or Disposal of Long-Lived Assets" group is classified as held for sale. An asset is impaired when (E) < (B) RECOGNITION AND MEASUREMENT . 55 Chapter 7: What should I know about mortgage servicing rights? Presented separately in the statement of financial position The entity has the ability and intention to transfer the asset to a purchaser in its current condition. 2. 2. Additional disaggregation should be provided in the statement of financial position (if material) or in the notes. --> tested for impairment Long-lived assets to be held and used Long-lived assets "held for sale" 1. Criteria to Be Met. According to the IFRS criteria, for revenue to be recognized, the following conditions must be satisfied: 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 Revenue recognition is an accounting principle that outlines the specific conditions under which revenue is recognized. Newly acquired long-lived assets held for sale Welcome to the Deloitte Accounting Research Tool (DART). Many long-lived assets which a company owns are specialized in nature and they can’t be sold over-night. [FRS 101 para A2.10A]. --> if (D) < (B) Project … 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. Impairment loss (E) fair value How an Available-for-Sale Security Works . Measured at the lower of (B) and (C) (B) carrying amount (C) fair value less cost to sell 4. Depreciation Official positions of the FASB are determined only after extensive due process and deliberations. Posted by hardi at Tuesday, November 02, 2010. It sets the presentation and disclosure requirements for discontinued operations. If (B) > (C) 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. Newer Post Older Post Home. The item you requested could not be found. --> adjusted carrying amount becomes "new cost basis" 2. 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. The price of the building has been fixed at $4m and a surveyor has valued the building based on market prices at $3.6m. An asset is not depreciated while classified as "held for sale" 1. A component of an entitycomprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. 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. If an impairment loss is recognized When management decided to put Tayto on the market, it would be a disposal group held for sale. The objective of IFRS 5 is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. 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. Topic 330: Inventory, ASC Codification Long-lived assets to be held and used 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 US GAAP IFRS . 31 Chapter 5: How about some examples? ASSETS HELD FOR SALE Under UK GAAP there is no held for sale definition. 66 Chapter 9: How do I measure and report fair value … 3 . (C) fair value less cost to sell (B) carrying amount separate presentation in the statement of financial position of an asset classified as held for sale and of the assets and liabilities included within a disposal group classified as held for sale; and separate presentation in the statement of comprehensive income of the results of discontinued operations. zAssets classified as held for sale are not amortised or depreciated. 2. 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