Accounting Implications of a Sudden Market Price Decline on Non-current Asset Held for Sale

Para 27 of Ind AS 105, Non-Current Assets Held for Sale and Discontinued Operations, states that an entity shall measure a non-current asset (or disposal group) that ceases to be classified as held for sale or as held for distribution to owners (or ceases to be included in a disposal group classified as held for sale or as held for distribution to owners) at the lower of:

(a) its carrying amount before the asset (or disposal group) was classified as held for sale or as held for distribution to owners, adjusted for any depreciation, amortization or revaluations that would have been recognized had the asset (or disposal group) not been classified as held for sale or as held for distribution to owners, and

(b) its recoverable amount at the date of the subsequent decision not to sell or distribute

Further, para 28 requires that an entity shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale or as held for distribution to owners in profit or loss from continuing operations in the period in which the criteria in paragraphs 7-9 or 12A, respectively, are no longer met.

This story explains through a practical case study, the accounting implications of a sudden market price decline that forces management to change its initial plan to sell a Non-current Asset held for Sale.

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