Accounting Online Program Certification Practice Test

What accounting standard governs the treatment of non-current assets held for sale and discontinued operations?

1. IAS 17

2. IFRS 5

3. IAS 24

4. IFRS 9

The correct answer is: IFRS 5

The correct response points to IFRS 5, which specifically addresses the accounting for non-current assets held for sale and the presentation and measurement of discontinued operations. This standard provides a clear framework for entities to classify, measure, and disclose assets that are no longer in use and are intended for sale rather than continued operation. IFRS 5 ensures that non-current assets must be classified as "held for sale" when they are available for immediate sale in their current condition and when it is highly probable that the sale will occur. It emphasizes that these assets should be measured at the lower of their carrying amount and fair value less costs to sell, ensuring that financial statements reflect the current value of the assets effectively. Additionally, IFRS 5 outlines the requirements for the reporting of discontinued operations, allowing users of financial statements to differentiate between the results of ongoing operations and those of disposed businesses. This clarity is crucial for investors and stakeholders who need to assess the ongoing viability and profitability of the organization post-disposal. In contrast, the other standards listed do not pertain to this specific topic. IAS 17 deals with leases, IAS 24 addresses related party disclosures, and IFRS 9 focuses on financial instruments. Hence, they do not cover the criteria or treatment