Ind AS 105 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Ind AS 105 governs non-current assets and disposal groups whose carrying amount will be recovered principally through sale rather than continuing use. Such assets are measured at the lower of carrying amount and fair value less costs to sell, are not depreciated, and — where they are discontinued operations — are presented separately in the financial statements.
Overview
Ind AS 105, notified under the Companies (Ind AS) Rules, 2015, ensures that assets an entity is about to sell are highlighted and measured on a sale basis, and that the results of operations being exited are shown separately so users can distinguish continuing from discontinuing performance.
Classification as Held for Sale
A non-current asset (or disposal group) is classified 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 is available for immediate sale in its present condition, subject only to terms usual for such sales; and
- the sale is highly probable — management is committed to a plan to sell, an active programme to locate a buyer has been initiated, the asset is marketed at a reasonable price, and the sale is expected to complete within one year.
Measurement
Immediately before classification, the asset is measured under its applicable standard (e.g. Ind AS 16). On classification as held for sale, it is remeasured at the lower of its carrying amount and fair value less costs to sell. Any excess of carrying amount over fair value less costs to sell is recognised as an impairment loss. A subsequent increase in fair value less costs to sell is recognised as a gain, but not exceeding the cumulative impairment loss previously recognised.
No Depreciation
A critical rule: non-current assets classified as held for sale (and non-current assets within a disposal group so classified) are not depreciated or amortised while classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group continue to be recognised.
Presentation on the Balance Sheet
Assets classified as held for sale, and the assets of a disposal group, are presented separately from other assets in the balance sheet; the liabilities of a disposal group are presented separately from other liabilities. They are not offset and are generally shown as current.
Discontinued Operations
A discontinued operation is a component of the entity that either has been disposed of or is classified as held for sale and (a) represents a separate major line of business or geographical area of operations, (b) is part of a single coordinated plan to dispose of such, or (c) is a subsidiary acquired exclusively with a view to resale. On the face of the statement of profit and loss, a single amount is presented comprising the post-tax profit or loss of discontinued operations and the post-tax gain or loss on measurement to fair value less costs to sell or on disposal, with a further analysis of that amount in the notes or the statement.
Worked Example
A company decides to sell a manufacturing division. The division's net assets have a carrying amount of ₹9,00,00,000; its fair value less costs to sell is estimated at ₹7,50,00,000. On classification as held for sale, the disposal group is written down to ₹7,50,00,000, and an impairment loss of ₹1,50,00,000 is recognised. From that date the division's assets are not depreciated, and its results are presented as a discontinued operation — a single post-tax line — in the statement of profit and loss.
Change of Plan
If the criteria are no longer met and the asset is no longer held for sale, it is measured at the lower of its recoverable amount and the carrying amount that would have existed had it never been classified as held for sale — that is, the previous carrying amount adjusted for depreciation, amortisation or revaluations that would have been recognised in the interim. Any adjustment is included in profit or loss from continuing operations.
Key Differences from Earlier Practice
Indian GAAP had no dedicated held-for-sale standard; discontinuing operations were dealt with only through AS 24 disclosures. Ind AS 105 introduces a distinct measurement basis (lower of carrying amount and fair value less costs to sell), suspends depreciation, and requires prominent single-line presentation of discontinued operations.