repeated in IFRS 10 or IFRS 11 – Joint Arrangements. However, we believe the
clarification should apply to assets or disposal groups within the scope of those standards.
As a result, when a disposal group or non-current asset that was classified as held for sale
represented an entire subsidiary, joint operation, joint venture or associate or was a
portion of an interest in a joint venture or associate, and subsequently no longer qualifies
as held for sale, financial statements must be amended retrospectively as though the
disposal group or non-current asset never qualified as held for sale.
This area has been considered by the Interpretations Committee. The committee decided
not to add it to its agenda, noting that IFRS 5 is a possible subject for a research project
by the IASB which would examine a number of areas (possible future developments of
206 Chapter
4
IFRS 6 – Exploration for and Evaluation of Mineral Resources – are discussed at 6
below). In its agenda decision the Committee observed the following: ‘paragraph 28
requires the effects of a remeasurement (upon ceasing to be classified as held for sale) of
a non-current asset to be recognised in profit or loss in the current period. Paragraph 28
also requires financial statements for the periods since classification as held for sale or as
held for distribution to owners to be “amended accordingly” if the disposal group or non-
current asset that ceases to be classified as held for sale or as held for distribution to
owners is a subsidiary, joint operation, joint venture, associate, or a portion of an interest
in a joint venture or an associate. The issue relates to a situation in which a disposal group
that consists of both a subsidiary and other non-current assets ceases to be classified as
held for sale. In such a situation, should an entity recognise the remeasurement
adjustments relating to the subsidiary and the other non-current assets in different
accounting periods, and should any amendment apply to presentation as well as to
measurement?’6 This articulation of the question by the Committee suggests that, until
any amendment to the standard is made, judgement may be required.
Regarding the treatment of discontinued operations in the statement of comprehensive
income, the standard states that if an entity ceases to classify a component as held for
sale, the results of operations of the component previously presented in discontinued
operations should be reclassified and included in income from continuing operations
for all periods presented. The amounts for prior periods should be described as having
been re-presented. [IFRS 5.36].
As discussed at 4.1.2 above, the amounts presented for non-current assets or for the
assets and liabilities of disposal groups classified as held for sale in the comparative
statement of financial position should not be reclassified or re-presented.
5 DISCLOSURE
REQUIREMENTS
5.1
Requirements of IFRS 5
As discussed at 2.2.4 and 3.2 above, IFRS 5 sets out detailed requirements for the
prominent presentation of amounts relating to non-current assets held for sale, disposal
groups and discontinued operations. In particular, and as discussed at 3.2 above, the single
amount reflecting the income from discontinued operations must be analysed into its
components, either on the face of the statement of comprehensive income or in the notes.
In addition, disclosure is required in the notes in the period in which a non-current asset
(or disposal group) has been either classified as held for sale or sold:
(a) a description of the non-current asset (or disposal group);
(b) a description of the facts and circumstances of the sale, or leading to the expected
disposal, and the expected manner and timing of that disposal;
(c) the gain or loss recognised as a result of measuring the non-current asset (or
disposal group) at fair value less costs to sell (discussed at 2.2 above) and, if not
separately presented on the face of the statement of comprehensive income, the
caption in the statement that includes that gain or loss; and
Non-current assets held for sale and discontinued operations 207
(d) if applicable, the segment in which the non-current asset (or disposal group) is
presented in accordance with IFRS 8 – Operating Segments (discussed in
Chapter 32 at 3.1). [IFRS 5.41].
If a non-current asset (or disposal group) meets the criteria to be classified as held for
sale after the reporting date but before the financial statements are authorised for issue,
the information specified in (a), (b) and (d) above should also be disclosed in the notes.
[IFRS 5.12].
Further, should:
• a non-current asset (or disposal group) cease to be classified as held for sale; or
• an individual asset or liability be removed from a disposal group,
then IFRS 5 requires disclosure, in the period of the decision to change the plan to sell
the non-current asset (or disposal group), a description of the facts and circumstances
leading to the decision and the effect of the decision on the results of operations for the
period and any prior periods presented. [IFRS 5.42].
5.2
Disclosures required by standards other than IFRS 5
IFRS 5 explains that disclosures in other IFRSs do not apply to non-current assets
(or disposal groups) classified as held for sale or discontinued operations unless
those IFRSs require:
• specific disclosures in respect of non-current assets (or disposal groups) classified
as held for sale or discontinued operations; or
• disclosures about the measurement of assets and liabilities within a disposal
group that are not within the scope of the measurement requirement of IFRS 5
and such disclosures are not already provided in the other notes to the
financial statements.
The requirement in the second bullet above reflects the fact that such assets continue
to be measured in accordance with the specific IFRS dealing with them. In practice,
much of the requirement will be satisfied by the disclosure of accounting policies. The
requirement for other disclosures will depend on the standard concerned. An example
would be actuarial assumptions used to measure a pension plan as the surplus or deficit
is not within the measurement scope of IFRS 5.
In December 2016 minor amendments were made to IFRS 12 – Disclosure of Interests
in Other Entities – by the IASB’s Annual Improvements to IFRS Standards 2014-2016
Cycle. The changes clarify that all the disclosures of that standard apply to interests that
are classified as held-for-sale, with the exception only of those disclosures (summarised
financial information) identified by IFRS 12 as not being required.
The standard goes on to say that additional disclosures about non-current assets (or
disposal groups) classified as held for sale or discontinued operations may be necessary
to comply with the general requirements of IAS 1, in particular paragraphs 15 and 125 of
that Standard. [IFRS 5.5B]. Those provisions deal with fair presentation and estimation
uncertainty and are discussed in Chapter 3 at 4.1.1 and at 5.2.1.
208 Chapter
4
6 FUTURE
DEVELOPMENTS
>
The IASB has, over recent years, discussed a number of issues related to IFRS 5, as set
out below.7
(a) The scope of held-for-sale classification;
(b) Accounting for disposal groups consisting mainly of financial instruments;
(c) The ‘excess impairment’ issue discussed at 2.2.3 above;
(d) The reversal of goodwill impairments in a disposal group;
(e) The allocation of impairments within a disposal group;
(f) The definition of discontinued operation and disclosures;
(g) The presentation of other comprehensive income of disposal groups;
(h) The application of the term ‘major line of business’;
(i) The treatment of intragroup transactions between continuing and
discontinued operations;
(j)
The application of the presentation requirements in the standard to a disposal
group consisting of a subsidiary and other non-current assets in the case of a
change to a plan of sale; and
(k) The applicability of the disclosure requirements in IFRS 12 to a subsidiary
classified as held-for-sale.
Item (i) above was referred to the Interpretations Committee for consideration. It
published an agenda decision in January 2016, this is discussed at 3.3 above. As regards
item (k) above, the Board has amended IFRS 12 (see 5.2 above).
Regarding the rest of the items, the IASB included a reference to them in its request for
views regarding its 2015 agenda consultation. In November 2016, the Board published
IASB Work Plan 2017-2021: Feedback Statement on the 2015 Agenda Consultation.
This document notes: ‘The Board agreed that the best way to start a review of these
issues would be through a post-implementation review of IFRS 5. The Board intends to
carry out that review after the forthcoming post-implementation reviews of IFRS 13
and of IFRS Standards 10–12.’
At the time of writing, the Board has started its post-implementation review of IFRS 13.8
Time will tell whether the Board will conduct a review of IFRS 5 and, if it does, which,
if any, of the matters discussed above will be addressed.
References
1
IASB Update, January 2016.
5
IFRIC Update, January 2016.
2
IASB Update, July 2009.
6
IFRIC Update, January 2016.
3
IASB Update, December 2009.
7 IASB meeting July 2015, Agenda Paper 12C.
4 IFRIC Update, January 2016.
8 IASB website, August 2018.
209
Chapter 5
First-time adoption
1 INTRODUCTION ............................................................................................. 217
1.1
Objectives of first-time adoption ...................................................................... 217
1.2 Authoritative
literature
........................................................................................
218
1.3 Defined
terms
........................................................................................................
218
1.4 Future
developments
...........................................................................................
219
2 WHO IS A FIRST-TIME ADOPTER? ................................................................ 219
2.1
The first IFRS financial statements in scope of IFRS 1 ................................. 219
2.2
When should IFRS 1 be applied? ....................................................................... 221
2.2.1
Repeat application of IFRS 1 ............................................................. 222
2.3
Determining the previous GAAP ...................................................................... 223
2.3.1
Transition to IFRSs from a similar GAAP ....................................... 225
3 OPENING IFRS STATEMENT OF FINANCIAL POSITION ............................. 225
3.1
First-time adoption timeline ............................................................................. 226
3.2
Opening IFRS statement of financial position and accounting
policies .................................................................................................................... 227
3.3
Fair value and deemed cost ............................................................................... 229
3.4 Transitional
provisions in other standards ..................................................... 229
3.5
Departures from full retrospective application ............................................. 230
4 EXCEPTIONS TO RETROSPECTIVE APPLICATION OF OTHER IFRSS ........ 232
4.1
Introduction .......................................................................................................... 232
4.2 Estimates................................................................................................................
232
4.3
Derecognition of financial assets and financial liabilities ............................. 235
4.4
Hedge accounting: general ................................................................................ 236
4.4.1
Paragraphs B5 and B6 of IFRS 1 when applying IFRS 9 .............. 236
4.4.2
Applicability of IAS 39 hedge requirements ................................... 237
210 Chapter
5
4.5
Hedge accounting in the opening IFRS statement of financial
position ................................................................................................................... 237
4.5.1
Measurement of derivatives and elimination of deferred
gains and losses ..................................................................................... 237
4.5.2
Hedge relationships reflected in the opening IFRS
statement of financial position .......................................................... 240
4.5.2.A
Prohibition on retrospective designation .................. 240
4.5.2.B Designation
in
anticipation of adoption of
IFRS .................................................................................... 241
4.5.3
Reflecting cash flow hedges in the opening IFRS
statement of financial position ........................................................... 241
4.5.4
Reflecting fair value hedges in the opening IFRS
statement of financial position .......................................................... 242
4.5.5
Reflecting foreign currency net investment hedges in the
opening IFRS statement of financial position ................................ 242
4.6
Hedge accounting: subsequent treatment ...................................................... 243
4.7
Hedge accounting: examples ............................................................................. 243
4.8 Non-controlling interests ................................................................................... 246
4.9
Classification and measurement of financial i
nstruments under
IFRS 9 ..................................................................................................................... 246
4.10 Impairment
of
financial
instruments under IFRS 9 ....................................... 247
4.11 Embedded
derivatives
.........................................................................................
247
4.12 Government loans ................................................................................................ 247
5 OPTIONAL EXEMPTIONS FROM THE REQUIREMENTS OF CERTAIN
IFRSS ............................................................................................................ 248
5.1
Introduction .......................................................................................................... 248
5.2
Business combinations and acquisitions of associates and joint
arrangements ........................................................................................................ 248
5.2.1
Definition of a ‘business’ under IFRS 3 ........................................... 249
5.2.1.A
Asset acquisitions ............................................................ 249
5.2.2
Option to restate business combinations retrospectively ........... 250
5.2.2.A
Associates and joint arrangements .............................. 252
5.2.3
Classification of business combinations .......................................... 253
5.2.4
Assets and liabilities to be recognised in the opening IFRS
statement of financial position ........................................................... 253
5.2.4.A
Assets and liabilities to be excluded ............................ 253
5.2.4.B Recognition
of
assets and liabilities ............................ 254
5.2.4.C
Previous GAAP carrying amount as deemed
cost ...................................................................................... 255
5.2.4.D In-process
research and development ........................ 257
5.2.4.E
Subsequent measurement under IFRSs not
based on cost .................................................................... 257
First-time
adoption
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 42
