IFRS 5 Non-current Assets Held for Sale and Discontinued Operations governs how an entity accounts for assets it has decided to sell and how it presents and discloses discontinued operations. Two requirements sit at its core. Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell, and depreciation stops. Those assets are presented separately in the statement of financial position, and the results of discontinued operations separately in the statement of comprehensive income (IFRS 5.1). IFRS 5 was issued in March 2004 to replace IAS 35 Discontinuing Operations (IFRS Foundation: IFRS 5).
Scope: classification for all, measurement with exceptions
The classification and presentation requirements apply to all recognised non-current assets and all disposal groups. The measurement requirements do not apply to certain assets, which continue to be measured under their own Standards (IFRS 5.2). Those assets are (IFRS 5.5):
| Asset | Measured under |
|---|---|
| Deferred tax assets | IAS 12 |
| Assets arising from employee benefits | IAS 19 |
| Financial assets within the scope of IFRS 9 | IFRS 9 |
| Non-current assets accounted for under the fair value model for investment property | IAS 40 |
| Non-current assets measured at fair value less costs to sell under the agriculture Standard | IAS 41 |
| Groups of contracts within the scope of IFRS 17 | IFRS 17 |
So these assets are not outside IFRS 5 altogether, as is sometimes said. They are outside its measurement requirements only and still follow its classification and presentation rules.
A disposal group is a group of assets to be disposed of together, by sale or otherwise, in a single transaction, with the liabilities directly associated with them that will be transferred in that transaction (IFRS 5, Appendix A). It may include current assets and current liabilities. If it contains a non-current asset within the scope of IFRS 5's measurement requirements, the group as a whole is measured at the lower of carrying amount and fair value less costs to sell (IFRS 5.4).
When is an asset "held for sale"?
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use (IFRS 5.6). The asset must be available for immediate sale in its present condition, on terms that are usual and customary for such sales, and the sale must be highly probable (IFRS 5.7). "Highly probable" means significantly more likely than probable (IFRS 5, Appendix A).
A sale is highly probable when (IFRS 5.8):
- the appropriate level of management is committed to a plan to sell;
- an active programme to locate a buyer and complete the plan has been initiated;
- the asset is actively marketed at a price that is reasonable in relation to its current fair value;
- the sale is expected to be completed within one year of the date of classification; and
- the actions required indicate that significant changes to the plan, or its withdrawal, are unlikely.
The probability of shareholders' approval, where required in the jurisdiction, is part of the assessment (IFRS 5.8).
Special cases
- Beyond one year: a delay does not prevent classification if it is caused by events or circumstances beyond the entity's control and there is sufficient evidence that the entity remains committed to the sale (IFRS 5.9), in the situations set out in Appendix B (IFRS 5.B1).
- Selling a controlling interest: an entity committed to a sale plan involving loss of control of a subsidiary classifies all of that subsidiary's assets and liabilities as held for sale, even if it will keep a non-controlling interest (IFRS 5.8A).
- Assets acquired for resale: classified at the acquisition date only if the one-year requirement is met and it is highly probable that the other criteria will be met within a short period, usually three months (IFRS 5.11).
- Criteria met after the reporting period: no classification in those financial statements; disclosure only, if the criteria are met before the statements are authorised for issue (IFRS 5.12).
- Assets to be abandoned: not held for sale, because their carrying amount will be recovered through continuing use (IFRS 5.13). An asset temporarily taken out of use is not treated as abandoned (IFRS 5.14).
Held for distribution to owners
The same requirements apply to assets held for distribution to owners acting in their capacity as owners (IFRS 5.5A). Classification requires the entity to be committed to the distribution, the assets to be available for immediate distribution, and actions to have begun that are expected to be completed within one year (IFRS 5.12A). Such assets are measured at the lower of carrying amount and fair value less costs to distribute (IFRS 5.15A).
Measurement
- Immediately before classification: measure the asset, or all assets and liabilities in the group, under the applicable Standards — for example, depreciation up to the classification date (IFRS 5.18).
- On and after classification: measure at the lower of carrying amount and fair value less costs to sell (IFRS 5.15). Costs to sell are the incremental costs directly attributable to the disposal, excluding finance costs and income tax expense (IFRS 5, Appendix A). If the sale is expected to occur beyond one year, costs to sell are measured at their present value (IFRS 5.17).
- Write-downs and recoveries: recognise an impairment loss for any write-down to fair value less costs to sell (IFRS 5.20). Recognise a gain for any later increase, but not beyond the cumulative impairment loss recognised under IFRS 5 or previously under IAS 36 (IFRS 5.21).
- Disposal groups: the impairment loss, or later gain, is allocated only to the non-current assets within IFRS 5's measurement scope, in the IAS 36 order of allocation (IFRS 5.22–23).
- No depreciation: a non-current asset is not depreciated or amortised while held for sale; interest and other expenses on the liabilities of a disposal group continue to be recognised (IFRS 5.25).
- On sale: any gain or loss not recognised before the sale date is recognised on derecognition (IFRS 5.24).
Presentation in the statement of financial position
A non-current asset held for sale and the assets of a disposal group are presented separately from other assets; the liabilities of the group are presented separately from other liabilities, and the two are not offset. The major classes of those assets and liabilities are disclosed on the face of the statement or in the notes, and any cumulative income or expense in other comprehensive income relating to them is presented separately (IFRS 5.38). Comparative amounts in the statement of financial position are not reclassified or re-presented to reflect the latest period's classification (IFRS 5.40).
Discontinued operations
A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity; while held for use it will have been a cash-generating unit or a group of them (IFRS 5.31).
A discontinued operation is a component that has been disposed of or is classified as held for sale and that (IFRS 5.32):
- represents a separate major line of business or geographical area of operations;
- is part of a single co-ordinated plan to dispose of such a line or area; or
- is a subsidiary acquired exclusively with a view to resale.
So selling a single factory or machine does not make its activity a discontinued operation unless one of these conditions is met. A gain or loss on remeasuring a held-for-sale asset that is not a discontinued operation stays in profit or loss from continuing operations (IFRS 5.37).
The entity discloses (IFRS 5.33):
- a single amount in the statement of comprehensive income: the post-tax profit or loss of discontinued operations plus the post-tax gain or loss on remeasurement to fair value less costs to sell or on disposal;
- an analysis of that amount into revenue, expenses, pre-tax profit or loss and the related tax, and the remeasurement or disposal gain or loss and its tax — in the notes or in a separate section of the statement;
- the net cash flows attributable to the operating, investing and financing activities of discontinued operations; and
- income from continuing and from discontinued operations attributable to owners of the parent.
The key difference for comparatives:
| Statement of financial position | Statement of comprehensive income | |
|---|---|---|
| Current period | Held-for-sale assets and liabilities shown separately | Single amount for discontinued operations |
| Comparative periods | Not re-presented | Re-presented to cover everything discontinued by the end of the latest period |
The table draws on IFRS 5 (IFRS 5.33, 34, 38, 40).
If a disposal group to be abandoned meets the definition, its results are presented as discontinued operations from the date it ceases to be used (IFRS 5.13).
When the plan of sale changes
If the criteria are no longer met, the entity stops classifying the asset as held for sale (IFRS 5.26). It measures the asset at the lower of (IFRS 5.27):
- its carrying amount before classification, adjusted for the depreciation, amortisation or revaluations that would have been recognised had it not been classified; and
- its recoverable amount at the date of the decision not to sell.
Any adjustment goes to profit or loss from continuing operations in the period the criteria cease to be met (IFRS 5.28). If the component was presented as a discontinued operation, its results are reclassified into continuing operations for all periods presented (IFRS 5.36). A direct move from held for sale to held for distribution to owners, or the reverse, is a continuation of the original plan, so the date of classification does not change (IFRS 5.26A).
Other disclosures
In the period an asset is classified as held for sale or sold, the notes disclose (IFRS 5.41): a description of the asset or group; the facts and circumstances of the sale and its expected manner and timing; the remeasurement gain or loss; and, if applicable, the reportable segment under IFRS 8 in which the asset is presented. When the plan changes, the entity explains the decision and its effect (IFRS 5.42). Disclosures in other Standards do not apply to these assets unless those Standards specifically require them (IFRS 5.5B). On segments, see IFRS 8 Operating Segments.
Worked examples
The numbers are illustrative.
1. A machine held for sale. An entity decides to sell a machine with a cost of 1,000,000 and accumulated depreciation of 400,000 at the classification date, so its carrying amount is 600,000 (IFRS 5.18). Fair value is 560,000 and costs to sell are 20,000, giving fair value less costs to sell of 540,000. The machine is measured at 540,000, an impairment loss of 60,000 is recognised (IFRS 5.15, 20), and depreciation stops (IFRS 5.25).
| Account | Debit | Credit |
|---|---|---|
| Assets held for sale | 600,000 | |
| Accumulated depreciation — machinery | 400,000 | |
| Machinery (cost) | 1,000,000 | |
| Impairment loss | 60,000 | |
| Assets held for sale | 60,000 |
At year-end, fair value less costs to sell rises to 575,000. A gain of 35,000 is recognised because it does not exceed the cumulative impairment loss of 60,000 (IFRS 5.21); the carrying amount becomes 575,000.
2. A discontinued operation. Another entity classifies a separate major line of business as held for sale. The line's results for the year are revenue of 2,000,000 and expenses of 1,700,000: a pre-tax profit of 300,000 with tax of 60,000. The remeasurement loss to fair value less costs to sell is 100,000, with a tax effect of 20,000 (an assumed 20% rate).
| Line item | Amount |
|---|---|
| Post-tax profit of the operation (300,000 − 60,000) | 240,000 |
| Post-tax remeasurement loss (100,000 − 20,000) | (80,000) |
| Profit for the year from discontinued operations (single amount) | 160,000 |
The comparative statement of comprehensive income is re-presented to move this line's prior-year results into discontinued operations (IFRS 5.34), while the comparative statement of financial position stays as it was (IFRS 5.40).
What is new in IFRS 5?
- Origin: issued in March 2004 to replace IAS 35 (IFRS Foundation: IFRS 5).
- 2026: IFRS 5 was not among the Standards amended by the requirements that apply for annual periods beginning on or after 1 January 2026 (IFRS Foundation: changes in the 2026 edition).
- IFRS 18 Presentation and Disclosure in Financial Statements: issued in April 2024 to replace IAS 1 for annual periods beginning on or after 1 January 2027; it makes consequential amendments to IFRS 5 (IFRS Foundation: changes in the 2026 edition; IFRS Foundation: IFRS 18).
- IFRS 19 Subsidiaries without Public Accountability: Disclosures: issued in May 2024 for annual periods beginning on or after 1 January 2027, it amends IFRS 5 among other Standards and lets some subsidiaries apply IFRS Accounting Standards with reduced disclosures (IFRS Foundation: changes in the 2026 edition).
How it fits with other Standards
- IAS 16 and IAS 36: the asset is measured under them up to the classification date; IFRS 5 then takes over and depreciation stops. For depreciation and derecognition, see IAS 16 Property, Plant and Equipment.
- IFRS 10: losing control of a subsidiary triggers paragraph 8A; the loss-of-control accounting itself is covered in IFRS 10 Consolidated Financial Statements.
- IFRS 13: sets out how the fair value used in the test is measured — see IFRS 13 Fair Value Measurement.
For practical models covering several other Standards, see the full IFRS bundle.
Sources
- IFRS Foundation: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. References in brackets are to paragraphs of the Standard and its appendices.
- IFRS Foundation: Changes in this edition (2026).
- IFRS Foundation: IFRS 18 Presentation and Disclosure in Financial Statements.