What does FRS 102 state about assets held for sale?

FRS 102 provides specific guidance on the treatment of assets held for sale, and it is essential to understand the reasoning behind each aspect. According to FRS 102, when an asset is classified as held for sale, it is typically not depreciated. This is because the asset is expected to be sold rather than used in the operation of the business, and thus depreciation, which allocates the cost of an asset over its useful life, ceases.

The primary focus for assets classified as held for sale is their measurement at the lower of their carrying amount and fair value less costs to sell. This reflects the fact that the entity's intention is to sell the asset rather than to retain and use it. Therefore, the understanding that these assets stop being depreciated is critical as it aligns with their status as assets held for sale under FRS 102.

Recognizing that an asset held for sale should not incur depreciation helps ensure that financial statements accurately reflect the potential proceeds from the sale, and this is a foundational aspect of FRS 102 guidelines regarding such assets.