This free, guided checker walks your finance team through the key decision points for IFRS 5 Discontinued Operations Presentation. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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A discontinued operation is a component - operations and cash flows clearly distinguishable operationally and for financial reporting (IFRS 5.31) - that has been disposed of or is held for sale and represents a separate major line of business or geographical area, is part of a single co-ordinated plan to dispose of one, or is a subsidiary acquired exclusively with a view to resale (IFRS 5.32). Weigh segment reporting, internal management structure, and the relative size of the operation. A common misapplication is presenting the exit of a minor product line as discontinued when it does not meet the major-line test.
Apply held-for-sale measurement and presentation, if the IFRS 5.6-5.8 criteria are met, without the single-line discontinued presentation of IFRS 5.33.
Official guidance: IFRS issued standards
IFRS 5.33 requires a single amount comprising post-tax profit or loss of discontinued operations and post-tax gain or loss on measurement to fair value less costs to sell or on disposal. Tie the amount to a discrete component trial balance so every continuing revenue and expense caption is scrubbed of the component's results. A common misapplication is leaving the component's results within continuing captions and adding a memorandum line, which overstates continuing revenue and expenses.
Present the discontinued operation as a single post-tax amount on the face of profit or loss (IFRS 5.33(a)).
Official guidance: IFRS issued standards
IFRS 5.33(b) requires disaggregation of the single amount into revenue, expenses, pre-tax profit or loss, the related tax, and the remeasurement or disposal gain or loss with its tax. The analysis may be given in the notes or on the face; if on the face, it is presented in a section identified as relating to discontinued operations (IFRS 5.33). Check that trading between continuing operations and the discontinued component is presented so continuing results reflect the group that will remain.
Add the IFRS 5.33(b) note analysis of revenue, expenses, and pre-tax profit or loss of the discontinued operation.
Official guidance: IFRS issued standards
IFRS 5.33(b)(ii) and (iv), read with IAS 12.81(h), require separate disclosure of the tax expense relating to the ordinary activities of the discontinued operation and the tax relating to the gain or loss on remeasurement or disposal. Build a discrete tax allocation for the component covering both current and deferred tax, including deferred tax effects of the held-for-sale remeasurement. A common trap is allocating only current tax and leaving deferred movements in continuing operations.
Disclose the tax expense of the discontinued operation and the tax on the disposal or remeasurement gain or loss separately (IFRS 5.33(b)(ii), (iv); IAS 12.81(h)).
Official guidance: IFRS issued standards
The single line combines the post-tax operating result with the post-tax gain or loss on measurement to fair value less costs to sell or on disposal (IFRS 5.33(a)). Impairment recognised on classification as held for sale (IFRS 5.20) belongs in the discontinued amount, not in continuing operating expenses. Verify the tax effect of the disposal is computed on the actual tax basis of the shares or assets sold rather than the book carrying amount.
Include the post-tax disposal or remeasurement gain or loss within the single discontinued line (IFRS 5.33(a)(ii)).
Official guidance: IFRS issued standards
IFRS 5.33(c) requires disclosure of the net cash flows attributable to the operating, investing, and financing activities of the discontinued operation, in the notes or on the face of the statements. The disclosure is not required for disposal groups that are newly acquired subsidiaries classified as held for sale on acquisition (IFRS 5.33). Trace disposal proceeds and intercompany settlements so cash flows are not double counted between the continuing and discontinued columns.
Disclose the discontinued operation net cash flows by operating, investing, and financing activity (IFRS 5.33(c)).
Official guidance: IFRS issued standards
IFRS 5.34 requires re-presenting comparatives to segregate continuing and discontinued results even when the discontinued classification arises in the current period. Rebuild each prior period presented from the component's historical results and prepare a bridge from previously issued figures for audit. Note the asymmetry: IFRS 5.40 prohibits re-presenting comparative statements of financial position for held-for-sale classification, so only profit or loss and cash-flow disclosures are restated.
Re-present comparative profit or loss with continuing and discontinued results segregated for all periods presented (IFRS 5.34).
Official guidance: IFRS issued standards
IFRS 5.34 requires the IFRS 5.33 disclosures - including the 5.33(c) cash-flow information - to be re-presented for all prior periods presented. In contrast, IFRS 5.40 prohibits re-presenting the comparative statement of financial position for held-for-sale classification; only income and cash-flow disclosures are re-presented. Prepare a bridge from previously issued figures to the re-presented columns for audit.
Re-present comparative cash-flow disclosures with continuing and discontinued segregation (IFRS 5.34).
Official guidance: IFRS issued standards
IAS 33.66 requires basic and diluted EPS for profit or loss from continuing operations on the face of the statement, and IAS 33.68 requires basic and diluted amounts per share for the discontinued operation, either on the face or in the notes. Use the same weighted average basic and diluted share denominators as for total EPS. A frequent error is omitting the diluted figure for the discontinued operation or presenting the split only for the current period without comparatives.
Present separate basic and diluted per-share amounts for continuing operations and the discontinued operation (IAS 33.66; IAS 33.68).
Official guidance: IFRS issued standards
IFRS 5.38 requires assets classified as held for sale and the assets and liabilities of a disposal group to be presented separately from other assets and liabilities; they may not be offset. Major classes are disclosed separately in the notes unless the group is a newly acquired subsidiary (IFRS 5.39). Do not reclassify prior-period balance sheets - IFRS 5.40 requires comparatives to remain as originally presented.
Present held-for-sale assets and disposal group liabilities as separate, unoffset line items on the statement of financial position (IFRS 5.38).
Official guidance: IFRS issued standards
IFRS 5.41 requires, in the period of classification, a description of the non-current asset or disposal group, the facts and circumstances of the sale or leading to the expected disposal together with its expected manner and timing, and the reportable segment in which the component is presented under IFRS 8. If a plan of sale changes, IFRS 5.42 requires a description of the facts and circumstances of that decision and its effect on results.
Discontinued operation presentation is complete: single post-tax line (IFRS 5.33(a)), note analysis (IFRS 5.33(b)-(c)), re-presented comparatives (IFRS 5.34), and IFRS 5.41 narrative. Complete the IFRS 5.41 narrative disclosures - component description, disposal facts, manner and timing, and segment - before issuance.
Official guidance: IFRS issued standards
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