Ind AS 105 requires a non-current asset (or disposal group) to meet two conditions before it can be classified as held for sale: it must be available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets, and the sale must be highly probable — meaning management is committed to a plan to sell, an active program to locate a buyer is underway, the asset is marketed at a reasonable price, and completion is expected within twelve months of classification. A stated management intention to sell, without the asset actually being ready and actively marketed, does not meet this test.
What "highly probable" actually requires evidence of
- A specific board or equivalent-level decision approving the sale, not an informal discussion.
- An active program to locate a buyer already underway — not merely planned for the future.
- The asset marketed at a price reasonable in relation to its current fair value.
- Completion genuinely expected within twelve months, with no indication that the twelve-month period is likely to be extended.
- Actions required to complete the plan indicating it's unlikely significant changes will be made to it, or that it will be withdrawn.
A property listed with an agent at a price well above comparable market valuations, with no genuine buyer interest for an extended period, does not satisfy the "reasonable price" and "highly probable" conditions, even where the company maintains it still intends to sell — the twelve-month deadline and the active marketing requirement are tested against actual facts, not stated intent alone.
What changes once an asset is classified as held for sale
| Aspect | Change |
|---|---|
| Measurement | Measured at the lower of carrying amount and fair value less costs to sell — a potential write-down, never written up above the original carrying amount |
| Depreciation | Stops — a held-for-sale asset is no longer depreciated, since it's no longer being used to generate ongoing operating benefit |
| Balance sheet presentation | Presented separately from other assets, typically as a distinct line within current assets, not within the ordinary non-current asset category |
Discontinued operations — a related but separate concept
A discontinued operation is a component of an entity that has either been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations — a narrower and more significant threshold than any individual asset being sold. Where that threshold is met, the results of the discontinued operation are presented separately in the statement of profit and loss, as a single line item net of tax, with comparative periods restated to present them the same way — so a reader can see continuing-operations performance cleanly separated from a business that's being exited.
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.
Related resources
- Fixed assets & capexFixed asset disposal: audit checklistThe authorisation trail for a disposal, testing the gain-or-loss computation, cleaning up the register and insurance, and GST on the sale of used assets.
- Fixed assets & capexInd AS 40: investment property, and why it's classified by purpose, not by typeThe same physical building can be investment property or ordinary PPE depending entirely on why the company holds it — the classification question is purpose, not bricks.
- Audit documentationInd AS 37: provisions, contingent liabilities and contingent assets — the three-way splitThree categories, three completely different treatments — recognise it, disclose it, or say nothing. Getting the category wrong is the whole misstatement.
Free tools, no signup
Each one reads a file entirely in your browser — or, for two of them, just answers a few questions — and nothing is ever uploaded.
- Purchase register checkDuplicate payments, round-sum amounts, weekend-dated invoices, incomplete records.
- GSTR-2B reconcilerMatches your purchase register against GSTR-2B — missing invoices either side, amount mismatches.
- Bank reconciliation checkerMatches your cash book against a bank statement — what's outstanding on each side.
- Payroll red-flag scannerBank accounts shared across employees, and records missing an ID, PAN or salary.
- CARO applicability checkerAnswer a few questions about the company and see which CARO 2020 clauses likely apply.
- MSME payment delay checkerMSME-flagged invoices paid — or still unpaid — beyond the 45-day Section 22 limit.
- Related-party transaction screenerTransactions above a threshold you set with no approval reference, grouped by counterparty.
- Depreciation useful life checkerCompares a useful life in use against the Schedule II, Part C indicative figure.
- Materiality calculatorOverall and performance materiality against PBT, revenue, assets or equity, with reasoning shown.
- Sample size calculatorStatistical sample size for a test of controls or a substantive test of detail.