P2 Query IFRS 5

@mathay2603 said:
Hi,

If A co. owns 60% of B co. but they plan on disposing of its holding, would it be dealt with as a NCA held for sale or a discontinued operation?

There was a question in the March’18 sitting that had this scenario and I can’t work out which it would fall under.

My gut says discontinued operation but the point regarding it being a subsidiary always held with the intention of sale puts me off it being this.

Many Thanks,

Hi Matt,

If they have met the criteria to be held for sale then it will be a non-current asset held for sale in the group SFP. As it is a NCA-HFS then it will also be considered a discontinued operation in the group SPL.

The key is to identify the NCA-HFS criteria first. If it isn’t NCA-HFS then it won’t be a discontinued operation unless it has actually been sold. Remember that to be discontinued the operation has to have either been classified as NCA-HFS or sold in the year.

If it is NCA-HFS then it will also be a discontinued operation.

The idea behind the standard is to encourage entities to make the disclosures earlier than what they previously used to before the standard came into existence. Previously the operation was only disclosed once it had been sold, which is a bit late to be useful to the user of the accounts. Now therefore, we make the disclosures once it has been agreed to be sold.

It is confusing but there is logic in the somewhere.

Thanks