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Ind AS 105 in practice — auditing the held-for-sale classification

Procedural companion on Ind AS 105: the actual evidence an auditor should obtain to support a held-for-sale or discontinued operations classification, beyond the standard's own criteria — board approval, buyer correspondence, and the measurement test at each reporting date.

Classifying an asset or disposal group as held for sale under Ind AS 105 is a management assertion about intent and probability — sale within one year, available for immediate sale in its present condition, actively marketed at a reasonable price — and the audit evidence has to independently corroborate each element rather than accept management's representation alone: specifically, board or equivalent authority approval of the plan to sell, documented active marketing (listing agreement, broker engagement, data room access logs), and correspondence or a signed agreement with a prospective buyer, each dated before or at the classification date, not obtained afterward to retroactively support it.

Evidence checklist, not criteria recap

  1. 01Board minute or delegated authority approving the specific disposal planShould name the specific asset or disposal group and be dated at or before the classification date — a general strategic intent to 'explore divestment options' discussed in an earlier meeting is not the same as committing to a specific plan.
  2. 02Evidence of active marketing at a price reasonable in relation to current fair valueAn asking price materially above an independently supportable fair value is itself evidence the sale is not genuinely probable within the one-year window, and should trigger a challenge to the classification.
  3. 03Buyer correspondence, LOI, SPA, or due diligence data room activityAbsence of any external party engagement by the time the financial statements are being finalised, several months after the stated classification date, is a strong indicator the held-for-sale criteria were not actually met at the balance sheet date.
  4. 04Reassess at every subsequent reporting date, not just at initial classificationIf the sale has not completed within the standard's one-year window, obtain the specific reason management relies on for any permitted extension (events or circumstances beyond the entity's control, with continued commitment evidenced) — absent that, the asset should be reclassified back out of held for sale.
  5. 05For discontinued operations, trace the separate presentation and prior period restatementA single line for post-tax profit or loss of the discontinued operation on the face of the P&L, and restatement of the comparative period to also present it as discontinued — test that comparatives were actually restated, not just the current period labelled.

A held-for-sale classification made in principle at year end, with the actual buyer search only starting after the financial statements are signed, is a back-dated classification — the measurement date (and the resulting impairment, if any, to fair value less costs to sell) is not what management is asserting and should be independently re-evaluated.

This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.

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