The presentation of discontinued operations is part of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Presentation of discontinued operations
The profit or loss for the year on discontinued operations is presented as a separate line in the statement of profit or loss and other comprehensive income after the figure ‘profit for the year’. Presentation of discontinued operations
The line items from ‘Revenue’ to ‘profit for the year’ should therefore include continuing operations only. The figure for discontinued operations should include the post tax gain or loss on disposal of the assets of the operation (if sold) or the gain or loss on re-measurement following transfer to ‘held for sale’ (if relevant). Presentation of discontinued operations
If no assets are sold or to be sold this will not be relevant. The breakdown of the profit or loss from discontinued operations (into revenue, expenses, tax etc.) is provided in a note to the financial statements or on the face of the performance statement.
Here is an example:Presentation of discontinued operations
Hatter plc has decided to dispose of a major division of its business. The related assets qualify to be classified as ‘held for sale’ in the statement of financial position. The following summary draft statement of profit or loss and other comprehensive income has been prepared.
Hatter plc: Statement of Profit or Loss and Other Comprehensive Income for year ended 31 December 2012.
The division being disposed of was a component of Hatter plc, and was a major line of business which is now ceasing permanently and in its entirety. The division contributed revenue of €200m, costs of €275m and a tax refund of €15m in the year ended 31 December 2012 (net loss 60). These amounts are included in the above figures. The assets to be sold have a combined fair value less costs to sell of €39m below their carrying value. This has not yet been recognised. Presentation of discontinued operations
The following shows the redrafted Statement of Profit and Loss and Other Comprehensive Income to comply with IFRS 5.
Other topics in discontinued operations
Definition of a discontinued operation
A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and (IFRS 5 32)
- represents a separate major line of business or geographical area of operations,
- is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
- is a subsidiary acquired exclusively with a view to resale. Presentation of discontinued operations
Component of an entity
Component of an entity is defined as operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity (IFRS 5 Appendix A). Paragraph IFRS 5 31 further clarifies that a component of an entity will have been a CGU while being held for use or a separate subsidiary (IFRS 5 36A). Presentation of discontinued operations
Operations that are abandoned can be classified as discontinued operations once they actually have been abandoned, not at the time when the management decision is made. Presentation of discontinued operations
Changes in classification
If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations are reclassified and included in income from continuing operations for all periods presented (IFRS 5 36).
The impacts relating to measurement of assets and liabilities (e.g. additional catch-up depreciation) are included in current year P/L of continuing operations (IFRS 5 28). Presentation of discontinued operations
P/L for prior periods should be restated so that all operations that have been classified as discontinued by the end of the reporting period for the latest period presented are presented according to the IFRS 5 requirements discussed here (IFRS 5 34). No such adjustments are made for the assets and liabilities in the statement of financial position.
See also: The IFRS Foundation