Ind AS 105 — Non-current Assets Held for Sale and Discontinued Operations

Ind AS 105 specifies the accounting for non-current assets (and disposal groups) that an entity intends to sell, and the presentation and disclosure of discontinued operations. It does two things AS 24 does not: it introduces a measurement basis for assets classified as held for sale (the lower of carrying amount and fair value less costs to sell, with depreciation ceasing), and it prescribes their separate presentation in the balance sheet. Combined with its discontinued-operations disclosures, it gives users a clear view of the parts of a business being exited. This makes it broader than AS 24, which is essentially a disclosure standard.

Objective and scope

The objective is to specify the accounting for assets held for sale and the presentation and disclosure of discontinued operations. Specifically, it requires assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell (with depreciation on such assets ceasing), and to be presented separately in the balance sheet; and it requires the results of discontinued operations to be presented separately in the statement of profit and loss. The classification and presentation requirements apply to all recognised non-current assets and disposal groups; the measurement requirements apply to all recognised non-current assets and disposal groups, except for certain assets (such as deferred tax assets, assets arising from employee benefits, financial assets within Ind AS 109, and investment property measured at fair value) which continue to be measured under their own standards even when held for sale.

The held-for-sale classification

An entity classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to apply, two conditions must be met:

The asset (or disposal group) must be available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets; and

The sale must be highly probable.

For the sale to be highly probable: the appropriate level of management must be committed to a plan to sell the asset; an active programme to locate a buyer and complete the plan must have been initiated; the asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value; the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification (subject to permitted extensions in specified circumstances beyond the entity's control); and actions required to complete the plan should indicate that it is unlikely that significant changes will be made or that the plan will be withdrawn. A disposal group is a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

Measurement of held-for-sale assets

Immediately before the initial classification of the asset (or disposal group) as held for sale, its carrying amount is measured in accordance with applicable Ind AS. Then, a non-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell. If fair value less costs to sell is below the carrying amount, an impairment loss is recognised. Any subsequent increase in fair value less costs to sell is recognised as a gain, but not in excess of the cumulative impairment loss previously recognised.

Crucially, a non-current asset classified as held for sale (or included in a disposal group so classified) is not depreciated (or amortised) while it is held for sale, because its value is expected to be recovered through sale rather than use. This ceasing of depreciation, and the lower-of-carrying-amount-and-fair-value-less-costs-to-sell measurement, are the measurement features that AS 24 lacks entirely.

If the criteria are no longer met, the entity ceases to classify the asset as held for sale and measures it at the lower of its recoverable amount and the carrying amount that would have been recognised had it never been classified as held for sale (that is, adjusted for depreciation that would have been charged).

Presentation of held-for-sale assets

A non-current asset classified as held for sale, and the assets of a disposal group classified as held for sale, are presented separately from other assets in the balance sheet; the liabilities of a disposal group classified as held for sale are presented separately from other liabilities. These assets and liabilities are not offset and are presented as single amounts (with further analysis in the notes). This separate presentation signals to users that these items will be recovered through sale.

Discontinued operations

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale, and: represents a separate major line of business or geographical area of operations; is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to resale. 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.

For discontinued operations, an entity presents, on the face of the statement of profit and loss, a single amount comprising the total of the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell (or on disposal). It also discloses an analysis of that single amount (revenue, expenses, pre-tax profit or loss, and the related tax) and the net cash flows attributable to the operating, investing, and financing activities of the discontinued operation. Comparatives are re-presented so that the discontinued-operation disclosures relate to all operations discontinued by the reporting date.

A full worked example

A company decides to sell a division. Its assets have a carrying amount of ₹60,00,000. The expected selling price is ₹55,00,000, with ₹2,00,000 of costs to sell. The division met all the held-for-sale criteria on 1 December. How is it measured and presented?

Step 1 — Check the classification criteria. To be "held for sale," the asset must be available for immediate sale in its present condition and the sale must be highly probable (management committed, active programme, expected within 12 months). Assume these are met.

Step 2 — Measure at the lower of carrying amount and fair value less costs to sell.

Item	Amount (₹)
Carrying amount	60,00,000
Fair value	55,00,000
Less: costs to sell	(2,00,000)
Fair value less costs to sell	53,00,000
Measure at lower	53,00,000

Step 3 — Recognise the write-down and stop depreciation. The ₹7,00,000 shortfall is an impairment, and — crucially — depreciation ceases from the date of classification.

Account	Debit (₹)	Credit (₹)
Impairment loss (P&L)	7,00,000
Assets held for sale		7,00,000

Two Ind AS 105 mechanics matter most. First, once an asset is classified as held for sale, depreciation stops — it is now being recovered through sale, not use. Second, if the division qualifies as a discontinued operation, its results are stripped out of continuing operations and shown as a single separate line in the P&L, so users can see the performance of the business that will remain. There is no exact AS equivalent; Ind AS 105 corresponds to IFRS 5.

How Ind AS 105 compares with AS 24

The frameworks differ significantly. AS 24 is essentially a disclosure standard: it requires information about a discontinuing operation to be disclosed from the initial disclosure event, but it does not prescribe a special measurement basis, and it does not use a "held for sale" classification. Ind AS 105 adds a measurement dimension — assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell, are no longer depreciated, and are presented separately in the balance sheet — and it defines discontinued operations with specific criteria, presenting their results as a single amount in profit or loss. The classification triggers also differ: Ind AS 105 turns on the held-for-sale criteria (available for immediate sale, highly probable within a year), whereas AS 24 turns on the initial disclosure event (binding sale agreement, or board approval and announcement of a plan). So Ind AS 105 goes well beyond AS 24 by changing how the assets are measured and presented, not just disclosed.

Common pitfalls

Recurring issues include classifying an asset as held for sale when the criteria are not met (not available for immediate sale, or the sale is not highly probable within a year); continuing to depreciate assets classified as held for sale; failing to remeasure to the lower of carrying amount and fair value less costs to sell; treating a minor disposal as a discontinued operation (it must be a separate major line of business or geographical area); and not re-presenting comparatives for discontinued operations.

Why this is cleaner on a unified system

Applying Ind AS 105 requires identifying disposal groups, remeasuring their assets, ceasing depreciation, presenting them separately, and — for discontinued operations — extracting the component's post-tax result and cash flows reliably. This is far easier when the entity's transactions are captured with sufficient dimensional detail in one connected system, so that the assets and liabilities of a disposal group, the remeasurement, and the discontinued-operation results and cash flows can be identified and presented consistently, and comparatives re-presented, without assembling the figures from separate tools.

This article is a detailed educational summary of Ind AS 105 in plain language. It is not a substitute for the full text of the standard. Accounting standards are amended from time to time; always verify the current, authoritative text of Ind AS 105 as notified under the Companies Act before relying on it, and consult a qualified chartered accountant for application to your specific circumstances.