ICAEW Financial Accounting and Reporting Practice Exam 2026 – Complete Prep Guide

Under IFRS 5, when a non-current asset is classified as held for sale, depreciation on that asset ceases immediately. This is because the asset is no longer being used in the operations of the entity, which is the purpose of depreciation in the first place. Depreciation is meant to reflect the usage and wear of an asset that contributes to generating revenue; however, when an asset is actively marketed for sale, it is no longer generating economic benefits from its use.

The standard outlines that non-current assets classified as held for sale should be measured at the lower of their carrying amount and fair value less costs to sell, and since these assets are not intended to be used in operational activities but rather sold, there is no basis for continuing to depreciate them. This aligns with the intent of IFRS 5, which focuses on ensuring that the financial statements reflect the current status of the asset as available for sale rather than subjected to ongoing depreciation charges.