SFRS(I) 5 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 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 their separate presentation in the statement of financial position, together with disclosure of discontinued operations. It is the Singapore equivalent of IFRS 5 under IFRS, and is in substance IFRS 5 as applied in Singapore.
Objective and scope
The objective is to specify the accounting for assets held for sale and the presentation and disclosure of discontinued operations. It requires assets meeting the criteria to be measured at the lower of carrying amount and fair value less costs to sell (with depreciation ceasing) and presented separately, and the results of discontinued operations to be presented separately in the statement of profit or loss. The measurement requirements apply except to certain assets (such as deferred tax assets, employee benefit assets, financial assets within SFRS(I) 9, and investment property at fair value) which keep their own measurement.
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. Two conditions must be met: the asset must be available for immediate sale in its present condition subject only to usual and customary terms, and the sale must be highly probable.
For the sale to be highly probable: management must be committed to a plan to sell; an active programme to locate a buyer must have been initiated; the asset must be actively marketed at a reasonable price; the sale should be expected to complete within one year (subject to permitted extensions beyond the entity's control); and it should be unlikely the plan will be significantly changed or withdrawn.
Measurement of held-for-sale assets
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 is not depreciated (or amortised) while held for sale, because its value is expected to be recovered through sale rather than use. If the criteria are no longer met, the entity ceases the classification and measures the asset 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.
Presentation and discontinued operations
Assets classified as held for sale (and the assets of a held-for-sale disposal group) are presented separately from other assets; the liabilities of such a disposal group are presented separately from other liabilities, without offsetting.
A discontinued operation is a component of an entity that 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 such, or is a subsidiary acquired exclusively with a view to resale. For discontinued operations, an entity presents on the face of the statement of profit or loss a single amount — the total of the post-tax profit or loss of the discontinued operation and any post-tax gain or loss on the measurement to fair value less costs to sell (or on disposal). It also discloses an analysis of that amount and the net cash flows of the discontinued operation, with comparatives re-presented.
A worked example
A Singapore group's board commits to a plan to sell a manufacturing division that is a separate major line of business; the division is available for immediate sale, is being actively marketed at a reasonable price, and the sale is highly probable within a year:
| Held-for-sale disposal group — treatment | Effect |
|---|---|
| Measurement | Lower of carrying amount and fair value less costs to sell |
| Depreciation while held for sale | Ceases |
| Presentation in statement of financial position | Assets and liabilities presented separately, not offset |
| Discontinued operation (separate major line of business) | Post-tax result + remeasurement shown as a single amount in profit or loss |
| Comparatives | Re-presented |
The division (a disposal group) is classified as held for sale: its assets are remeasured to the lower of carrying amount and fair value less costs to sell, depreciation ceases, and its assets and liabilities are presented separately. Because it is a separate major line of business, it is also a discontinued operation, so its post-tax result and any remeasurement loss are presented as a single amount in the statement of profit or loss, with the analysis and cash flows disclosed and comparatives re-presented.
How SFRS(I) 5 relates to IFRS
SFRS(I) 5 is identical to IFRS 5 under IFRS — the same held-for-sale criteria, the same measurement at the lower of carrying amount and fair value less costs to sell (with depreciation ceasing), the same separate presentation, and the same treatment of discontinued operations as a single amount in the statement of profit or loss. An entity familiar with IFRS 5 will find SFRS(I) 5 to be the same standard.
Common pitfalls
Recurring issues include classifying an asset as held for sale when the criteria are not met; 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 SFRS(I) 5 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 SFRS(I) 5 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 SFRS(I) 5 as issued by the Singapore Accounting Standards Council before relying on it, and consult a qualified professional accountant for application to your specific circumstances.