Question of the day
2026-10-17
Accounting
What happens to the accounting for a long-lived asset (or disposal group) once it is classified as HELD FOR SALE?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
Held-for-sale classification requires management commitment to a plan, an active program to find a buyer, and a sale that is probable within one year at a reasonable price. Once classified
- you STOP depreciating/amortizing the asset — it's being recovered through sale, not use
- you remeasure it at the LOWER of carrying amount and fair value less costs to sell, taking any write-down through earnings (later recoveries can be recognized, but only up to cumulative losses taken)
- it's presented separately on the balance sheet as held-for-sale, with the disposal group's liabilities shown separately too. If the disposal represents a STRATEGIC SHIFT with major effect (exiting a geography or business line), results are also recast into DISCONTINUED OPERATIONS, shown net of tax below income from continuing operations for all periods presented.
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