Accounting Treatment for Impairment Loss on Division Held for Sale
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- By Taxmann
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- Last Updated on 1 February, 2024
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As per Ind AS 105, Non-Current Assets Held for Sale and Discontinued Operations, an entity is required to categorize a non-current asset (or disposal group) as held for sale if its recovery is primarily anticipated through a sale transaction rather than ongoing use. The measurement of such an asset (or disposal group) is determined by the lower of its carrying amount and fair value less costs to sell.
In the event of an initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell, an entity is obliged to recognize an impairment loss to the extent it hasn’t been acknowledged before. For a disposal group, any impairment loss (or subsequent gain) acknowledged should impact the carrying amount of non-current assets within the group that fall under the measurement requirements of Ind AS 105.
In the current scenario, the management of the company decided to sell one of its divisions as a going concern in the beginning of FY (01.04.20X1). Active marketing efforts were initiated, resulting in substantial inquiries. The management initially estimated to receive Rs. 32,00,000 from the division’s sale. But, later on after the quarter end, due to improved market conditions, the company received and accepted a firm offer to purchase the division for Rs. 33,00,000 by 01.08.20X1
To understand how the proposed sale will be reported in the interim financial statements for the quarter ended 30.06.20X1
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