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1
Recognition And Valuation of the Non-Current Assets Held
for Sale On The Example Of Rostelecom And MTS
Abstract
IFRS were created in order to provide a common global language for doing business: the
accounting of companies should be understandable and comparable within international
boundaries.
The relevance of this work is due to the fact that today, in modern conditions, the
reflection of information about non-current assets about the company in the financial
statements plays an important role not only for investors, but also for the owner and the
company as a whole. Rational actions with non-current assets can not only stabilize the
financial condition of the company, but also improve it by increasing profits.
Analysis of the results of the business, which shows which assets give or will give in the
future an inflow of cash, and which will not bring profit, is important for the company's
management.
This analysis helps to make important decisions for the business: whether to continue to
invest money or get rid of assets that do not bring profit. Whether to sell the asset quickly
in order to quickly get money to cover the debt or to earn this money through the further
use of the asset.
IFRS 5 "Long-term assets intended for sale and discontinued activities" defines the
procedure for accounting for and reporting the results of such decisions.
Key words
IFRS, financial statement, non-current assets, non-current assets held for sale, IFRS 5,
recognition, valuation.
Introduction
When a company makes the decision to sell an asset or to stop some part of its business,
it is making a decision that affects the future cash flows, profitability and overall financial
situation. The users of the financial statements should be informed about these events.
Therefore, IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations was
issued to highlight the results from continued operations and to separate them from the
results of the ongoing activities.
Professor M.L. Pyatov argues that the concept of non-current assets is "a direct
consequence of the embodiment in accounting of the theory of capital of Adam Smith
(1723 - 1790). He divided the capital of the enterprise depending on the method of use
into two parts - the main and the circulating. Fixed capital, according to Smith, makes a
profit "without entering into circulation or without changing ownership." Working
capital, by contrast, "brings income only in the process of circulation or changing
owners". (Kozeltseva E.A., 2019)
Economist I.I. Bochkareva believes that non-current assets are all assets that have been
used for more than a year and do not belong to current assets. The same point of view is
shared by Professor N.A. Kamorjanova. It characterizes non-current assets as funds that
are used in the organization for more than one year. (Kulikova L.I., 2011)
Professor B.T. Zharylgasova also considers that the distinguishing criterion for
classifying assets as non-current assets is a useful life of more than 12 months. She argues
that "non-current assets are investments with long-term goals in real estate, bonds, stocks,
mineral reserves, joint ventures, intangible assets, etc." (Mislavskaya N.A., 2016)
Thus, it is possible to define non-current assets as accounting objects that are used in the
course of production activities, works and services for more than one year, are reliably
valued and are able to make a profit in the course of economic activity, and which were
not originally acquired for resale.
Literature review
An asset may be recognized by a company as an asset intended for sale under two possible
options: either book value or fair value less disposal costs. Moreover, IFRS 5 obliges to
recognize such an asset as a minimum amount between the book value and fair value.
In the event that an asset acquired as a separate part of an entire line of business is to be
sold, then the entire activity is measured at fair value, with the exception of selling costs.
There may be such a situation that the sale of this type of asset will last more than one
year. In such a case, the company must estimate the cost of selling in accordance with the
current costs. But it is worth noting that, if at the end of the year the sales costs are
exceeded, then they must be included in the financial result of current activities.
The value of the asset before its classification as intended for sale must be estimated
according to the rules of IFRS. For example, in the first step, an asset must be measured
