Guideline on TFRS 5, ‘Non-current assets held for sale and discontinued operations’

Key considerations for applying TFRS 5

1.  Determining if an asset is available for immediate sale

TFRS 5 requires that, for an asset to be classified as held for sale, it must be available for immediate sale in its present condition. However, “immediate” does not always mean instantaneous. The new guideline provides the following examples:

Example 1: Allowable Delay

A factory with a highly probable sale may still be classified as held for sale even if the company needs a short period (e.g., 2 months) to vacate the premises, provided that this is customary in the industry.

Example 2: Significant Continuing Involvement

If a company continues to use a factory pending completion of a new facility and needs to complete buyer-specified renovations, the asset is not considered available for immediate sale.

Example 3: External Factors Preventing Sale

If legal issues (e.g., environmental concerns) prevent the transfer of an asset, it cannot be classified as held for sale until these issues are resolved.

2.  Assessing if a sale is highly probable

For a sale to be considered highly probable, the asset must be actively marketed at a reasonable price. The guideline provides an example illustrating this point:

Example 4: Market Price Fluctuations

A company intending to sell vehicles may need to reassess the ‘highly probable’ criterion if market prices drop significantly and the asking price is not adjusted accordingly.

3.  Classification of newly acquired assets intended for sale

The new TFRS 5 guideline provides some flexibility related to assets acquired with the intention to sell them:

• The one-year sale criterion must be met at acquisition.

• It should be highly probable that other criteria will be met shortly after acquisition (typically within 3 months).

Important disclosure requirements

The guideline emphasizes that, if classification criteria are met after the reporting period, but before approval of the financial statements, companies must disclose the following:

1.  A description of the non-current asset (or disposal group)

2.  A description of the facts and circumstances of the sale or of those leading to the expected disposal, and the expected manner and timing of that disposal

3.  The reportable segment containing the noncurrent asset (or disposal group) in accordance with TFRS 8, ‘Operating Segments’

Conclusion

This new guideline provides valuable clarification for proper application of TFRS 5, and requires careful consideration of all relevant facts and circumstances. We recommend that non-current assets be reviewed regularly to ensure appropriate classification and disclosure in line with these updated guidelines.

Reference (in Thai):

• TFRS 5-Manual. Retrieved from Federation of Accounting Professions.