Ind AS 105 is not triggered merely because management wants to sell an asset. A non-current asset, or disposal group, must first meet the held-for-sale test: its carrying amount is expected to be recovered principally through sale rather than continuing use. Once it qualifies, measurement, depreciation and presentation can change. ICAI’s current Ind AS 105 text in the 2025–26 Compendium is the primary reference for the rules below.
What “held for sale” means under Ind AS 105
A non-current asset or disposal group is classified as held for sale when recovery is expected principally through a sale transaction rather than through continuing use. The asset must be available for immediate sale in its present condition, subject only to terms that are usual and customary for that type of sale, and the sale must be highly probable.
“Highly probable” requires more than an internal intention. Appropriate management must be committed to the plan, an active buyer programme must have started, the asset must be marketed at a price reasonable relative to current fair value, and completion should normally be expected within one year. The required actions should also make significant plan changes or withdrawal unlikely.
A practical classification gate
Before changing the balance-sheet classification, work through the following questions in order:
- Recovery route: will the carrying amount be recovered principally through sale rather than continuing use?
- Immediate availability: is the asset or disposal group available for immediate sale in its present condition, apart from usual and customary sale terms?
- Management commitment: has the appropriate level of management committed to a sale plan?
- Buyer programme: has an active programme to locate a buyer and complete the plan begun?
- Marketability: is the asset being actively marketed at a price reasonable in relation to current fair value?
- Completion: is completion normally expected within one year, with actions indicating that significant plan changes or withdrawal are unlikely?
The one-year period is not absolute. An extension is permitted where delay arises from events or circumstances beyond the entity’s control and there is sufficient evidence of continuing commitment to the sale plan; Appendix B contains the detailed conditions.
Measurement after classification: use the lower amount
Immediately before initial held-for-sale classification, the carrying amounts of the asset, and of the assets and liabilities in a disposal group, are first measured under the applicable Ind AS. After that step, a non-current asset or disposal group within the measurement scope of Ind AS 105 is measured at the lower of carrying amount and fair value less costs to sell.
If fair value less costs to sell is below carrying amount, the reduction gives rise to an impairment loss. A later increase can produce a gain, but the reversal is capped by the relevant cumulative impairment loss recognised under Ind AS 105 or, where applicable, Ind AS 36.
Do not mechanically remeasure every disposal-group item under Ind AS 105. Certain assets are excluded from its measurement provisions, including deferred tax assets, employee-benefit assets and financial assets within Ind AS 109; those continue to be measured under the relevant Ind AS before the group is remeasured.
Depreciation stops, but other expenses do not automatically stop
Once a non-current asset is classified as held for sale, depreciation or amortisation ceases while that classification continues. Interest and other expenses attributable to liabilities of a disposal group, however, continue to be recognised.
Worked example: a machine classified as held for sale
Assume a company owns a machine with a carrying amount of ₹12 million. At the reporting date, management has formally approved a sale plan, the machine is available for immediate sale, an active buyer search is under way, it is being marketed at a reasonable price and completion within one year is highly probable. After measuring the machine under the applicable Ind AS immediately before classification, its carrying amount remains ₹12 million. Fair value less costs to sell is ₹10.8 million.
Because the lower figure is ₹10.8 million, the held-for-sale measurement produces a ₹1.2 million write-down. Depreciation on the machine then ceases while it remains classified as held for sale. If, instead, the sale criteria were met only after the reporting period, the company would not classify the machine as held for sale in those financial statements merely because the decision occurred before they were issued; the disclosure rule for post-reporting-period satisfaction of the criteria would need to be considered.
Held for sale is not the same as a discontinued operation
A held-for-sale asset does not automatically become a discontinued operation. A discontinued operation must be a distinguishable component that has been disposed of or is held for sale and also represents a separate major line of business or geographical area, forms part of a coordinated plan to dispose of such a major line or area, or is a subsidiary acquired exclusively for resale.
When the discontinued-operation definition is met, Ind AS 105 requires separate profit-and-loss presentation and related analysis. By contrast, a held-for-sale asset that does not meet that definition remains part of continuing operations for the relevant gain or loss. The ICAI Educational Material page on Ind AS 105 is a useful first-party learning resource for the standard’s classification and discontinued-operation framework.
Abandonment and temporary non-use are different again
An asset to be abandoned is not classified as held for sale because recovery is principally through continuing use rather than sale. A non-current asset temporarily taken out of use is also not treated as abandoned. Closing, using to the end of economic life and selling are different fact patterns.
Year-end documentation checklist
- Approval evidence: retain board, committee or authorised-management approval showing commitment to the sale plan.
- Immediate-sale evidence: document the asset’s present condition and any conditions that must be completed before a buyer can take it.
- Buyer and marketing evidence: retain broker mandates, advertisements, buyer outreach, offers or other evidence of an active programme.
- Price support: document why the asking price is reasonable relative to current fair value.
- Timing assessment: support the expected completion date and, where it exceeds one year, document why the permitted exception applies.
- Pre-classification measurement: complete required measurement under other applicable Ind AS before applying Ind AS 105.
- Fair value less costs to sell: retain the valuation basis and directly attributable selling-cost assumptions.
- Depreciation control: ensure depreciation or amortisation stops only from the date the asset actually qualifies for held-for-sale classification.
- Presentation test: separately assess whether the disposal also meets the narrower discontinued-operation definition.
Use the current official text before closing the accounts
For the latest wording, use ICAI’s 2025–26 Compendium of Indian Accounting Standards, Volume I, which links directly to the current Ind AS 105 document. This is preferable to relying on an old summary or a remembered checklist because classification depends on the full facts and the standard can be amended.
Practical takeaway
Apply Ind AS 105 as a sequence, not as a label: first prove that sale rather than use is the principal recovery route; then satisfy the immediate-availability and highly-probable sale criteria; measure applicable items correctly; stop depreciation only after classification; and separately test whether the disposal qualifies as a discontinued operation. A documented decision tree at the reporting date is the simplest way to keep classification, measurement and presentation conclusions aligned.
