Pro-Rata Allocation of Unidentifiable Impairment Loss on the Classification of Assets as Held for Sale in Line With Ind AS 105

When a company plans to sell a business unit or group of assets, and the sale is highly probable with the assets ready for immediate disposal, Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations requires them to be classified as held for sale. Once classified, these assets are measured at the lower of their carrying amount and fair value less costs to sell. If the fair value is lower, the difference is recognised as an impairment loss.

Any impairment that can be directly linked to specific assets should be recognised first. But what about the remaining loss? This portion, which cannot be attributed to specific items, needs thoughtful allocation—typically across the remaining assets in a consistent manner. This is where judgment and careful allocation come into play. Should it be spread across other assets? And if so, how should that allocation be approached? In this case Ind AS 105 provides guidance on how the remaining impairment loss should be allocated.

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