Component of an entity
IFRS 5 uses this concept in assessing discontinued operations. A component that is disposed of or classified as held for sale must also satisfy one of the standard’s specified criteria, such as representing a separate major line of business or geographical area. A distinguishable component is not automatically a discontinued operation. Consider the required separate presentation and disclosure after classification.
Worked example
A group has a distinct division with separately identifiable operations and cash flows. If the division represents a major line of business and is disposed of, it may meet the discontinued-operation criteria.
Common mistake
Calling every distinguishable department a discontinued operation without checking disposal or held-for-sale status and the additional significance criteria.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |