Additional disclosures about discontinued operations

[Yakub02]

 the disposal (e.g. purchase price adjustments; or

 obligations retained by the seller (e.g. environmental and product warranty obligations). Such adjustments are classified separately in discontinued operations and the nature and amount of the adjustments are disclosed. Note on discontinued operations and the statement of cash flows

IFRS 5 states that in the statement of cash flows, there should be separate disclosure of the net cash flows in the period attributable to operating activities, investing activities and financing activities of the discontinued operations.

These disclosures may be presented either on the face of the statement of cash flows or in the notes to the financial statements. Additional disclosures Additional disclosures about discontinued operations must be included in the notes to the financial statements.

These include:  a description of the non-current asset or disposal group;  a description of the facts and circumstances of the sale; and  in the case of operations and non-current assets ‘held for sale’, a description of the facts and circumstances leading to the expected disposal and the expected manner and timing of the disposal.

Disclosure about assets held for sale and discontinued operations, is intended to help users understand the implications for future results and cash flows.

The classification is based on actions taken by management at or before the reporting date and expectation that a sale will be achieved.

 

[Yakub02]

Application of this standard requires different judgements and estimates to be made which would have an impact on figures reported in the financial statements. These include the following:  Whether the held for sale criteria are satisfied (several judgements); and  Whether a disposal is a discontinued operation

Lease: A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

A lease is a way of obtaining a use of an asset, such as a machine, without purchasing it outright. The company that owns the asset (the lessor) allows another party (the lessee) to use the asset for a specified period of time in return for a series of rental payments.

 

[Yakub02]

Leases give lessees the right to use assets in return for the lessees accepting an obligation to make a series of payments to the owner of the asset, the lessor.

The previous accounting rules set out in IAS 17: Leases focused on identifying leases that were economically similar to purchasing the asset being leased. When this was the case, the lease was classified as a finance lease and reported on the lessee’s statement of financial position. All other leases were classified as operating leases and were not reported on the lessee’s statement of financial

Operating leases gave lessees the right to use assets and impose obligations on the lessee to pay fort his right in the same way as finance leases.

 

[Yakub02]

The rights and obligations under operating leases often satisfied the definitions of assets and liabilities set out in the conceptual framework yet these were not recognised on the statement of financial position. Consequently, a lessee’s statement of financial position provided a misleading picture about leverage and the assets that the lessee uses in its operations.

Leases give lessees the right to use assets in return for the lessees accepting an obligation to make a series of payments to the owner of the asset, the lessor. The previous accounting rules set out in IAS 17:

Leases focused on identifying leases that were economically similar to purchasing the asset being leased. When this was the case, the lease was classified as a finance lease and reported on the lessee’s statement of financial position. All other leases were classified as operating leases and were not reported on the lessee’s statement of financial position.