ASPE Section 3475
Active
Disposal of Long-lived Assets and Discontinued Operations
Disposal of Long-lived Assets and Discontinued Operations is part of the Accounting Standards for Private Enterprises (ASPE).
1
Conceptual Framework Linkage
Presenting held-for-sale assets and discontinued businesses distinctly from ongoing operations
ASPE Section 3475 governs the CLASSIFICATION and MEASUREMENT of LONG-lived assets HELD for SALE, and the PRESENTATION of DISCONTINUED operations SEPARATELY from CONTINUING operations WITHIN the INCOME Statement (see the COMPANION Section 1520 poster). THE Section is BROADLY converged with the GENERAL approach ALSO used INTERNATIONALLY under IFRS 5.
2
Scope
Long-lived assets or components an enterprise intends to dispose of
This Section applies TO long-LIVED assets (OR groups OF assets) an ENTERPRISE intends TO dispose of BY sale, and TO components OF an enterprise THAT have BEEN disposed of OR classified AS held FOR sale.
3
Held-for-Sale Classification Criteria
Genuine, imminent commitment to sell
Management, having appropriate authority, is committed to a plan to sell the assetThe asset is available for immediate sale in its present conditionAn active program to locate a buyer has been initiatedThe sale is probable, and expected to complete within one yearThe asset is being actively marketed at a reasonable price relative to its current fair valueIt is unlikely that significant changes will be made to the plan, or that the plan will be withdrawn
4
Measurement Once Held for Sale
Lower of carrying amount and fair value less costs to sell
ONCE classified AS held FOR sale, an ASSET (or ASSET group) is MEASURED at the LOWER of ITS carrying AMOUNT and FAIR value LESS costs TO sell – WITH any WRITE-down recognized IMMEDIATELY as AN impairment LOSS.
5
No Further Depreciation While Held for Sale
Depreciation ceases at the classification date
AN asset CLASSIFIED as HELD for SALE is NOT further DEPRECIATED (or AMORTIZED) WHILE it REMAINS in THAT classification – CONSISTENT with the ASSET being MEASURED at a LOWER-of-cost-and-FAIR-value basis RATHER than THROUGH ongoing SYSTEMATIC allocation.
6
Discontinued Operations – Definition
A separate major line of business or geographical area
A DISCONTINUED operation is a COMPONENT of an ENTERPRISE 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 – OR is PART of a SINGLE, coordinated PLAN to DISPOSE of SUCH a SEPARATE major LINE of BUSINESS or GEOGRAPHICAL area.
7
Presentation of Discontinued Operations
Separated from continuing operations within the Income Statement
THE results OF a DISCONTINUED operation are PRESENTED separately WITHIN the INCOME Statement, DISTINCT from CONTINUING operations (SEE the COMPANION Section 1520 poster) – HELPING readers ASSESS the ONGOING, UNDERLYING earning POWER of the BUSINESS distinct FROM operations THAT are BEING wound DOWN or SOLD.
8
Worked Example – Classifying an Asset as Held for Sale
Writing an asset down to fair value less costs to sell
Example: A manufacturing facility being actively marketed
A company commits to a plan to sell an idle manufacturing facility, carrying amount $2,800,000, meeting all held-for-sale criteria. The facility's fair value less costs to sell is $2,500,000.
The COMPANY writes the FACILITY down to $2,500,000, RECOGNIZING a $2,800,000 − $2,500,000 = $300,000 impairment LOSS, and CEASES further DEPRECIATION WHILE the ASSET remains CLASSIFIED as HELD for SALE.
9
Worked Example – Presenting a Discontinued Operation
Isolating the wound-down segment's results
Example: Exiting a separate geographical division
A company sells its entire European division – a separate, distinct geographical area of operations – meeting the discontinued operations criteria. The division generated a $180,000 loss (including disposal costs) during the year, while continuing operations earned $2,100,000.
The COMPANY presents INCOME from CONTINUING operations of $2,100,000, SEPARATELY presents the $180,000 LOSS from DISCONTINUED operations, ARRIVING at NET income of $2,100,000 − $180,000 = $1,920,000 – CLEARLY distinguishing the ONGOING business FROM the EXITED division.
10
Disclosure Requirements
What Section 3475 requires
Description of assets or asset groups classified as held for sale, and the facts and circumstances of the saleResults of discontinued operations, presented separately, including revenue, expenses, and any gain or loss on disposalImpairment losses (and reversals, where the asset's fair value less costs to sell subsequently increases) recognized on held-for-sale assets
11
Critical Judgments & Estimates
Where judgment matters most
SIGNIFICANT JUDGMENTS
Whether all held-for-sale classification criteria are genuinely metWhether a disposed or held-for-sale component genuinely represents a separate major line of business or geographical area
SIGNIFICANT ESTIMATES
Fair value less costs to sell for a held-for-sale asset
12
Relationship to IFRS 5
Comparison – ASPE Section 3475 vs IFRS 5
FeatureASPE Section 3475IFRS 5
Held-for-sale classification criteriaBroadly similar cumulative criteriaBroadly similar cumulative criteria – converged
Measurement basisLower of carrying amount and fair value less costs to sellLower of carrying amount and fair value less costs to sell – converged
A GENUINELY thoroughly CONVERGED standard – the CORE classification and MEASUREMENT mechanics CLOSELY mirror the INTERNATIONAL approach, WITH no MEANINGFUL substantive DIVERGENCE to REPORT.
13
Statement Mapping
Where every disposal/discontinued operations event lands
EventStatement(s) affectedNotes
Held-for-sale write-downBS ISImpairment loss recognized immediately
Discontinued operations resultsISPresented separately from continuing operations
14
Related Standards
Cross-reference map
SectionConnection
Section 1520Income Statement – governs the overall presentation this Section's discontinued operations separation feeds into
Section 3063Impairment of Long-lived Assets – a related, but distinct, impairment framework for assets remaining in use
15
Quick-Reference Glossary
Held for sale
A classification for a long-lived asset whose carrying amount will be recovered principally through sale, rather than continuing use, meeting specific cumulative criteria.
Discontinued operation
A component of an enterprise, representing a separate major line of business or geographical area, that has been disposed of or is classified as held for sale.
Financial statement key (ASPE terminology)
BS Balance Sheet
IS Income Statement
SRE Statement of Retained Earnings / Statement of Changes in Equity
SCF Cash Flow Statement