When are gains or losses recognized for assets held for sale under UK GAAP?

Under UK GAAP, gains or losses on assets held for sale are recognized at the point of disposal. This means that any difference between the carrying amount of the asset and the proceeds from its sale is recognized in the financial statements at that time.

The rationale behind this treatment is consistent with the definition of a transaction; the transfer of ownership must occur for a gain or loss to be realized. Until the sale is completed, the asset's value remains on the balance sheet, meaning that any theoretical revaluations or changes in market price do not impact the income statement until an actual transaction takes place. This aligns with the conservatism principle in accounting, where unrealized gains should not be recognized to avoid inflating financial performance before realization.

Other considerations like reclassification or periodic evaluations do not trigger recognition of gains or losses; they may affect how the asset is categorized but do not represent the realization of profit or loss. Thus, only upon completing the sale are the proceeds definitive enough to recognize a gain or loss in the financial records.