Held-for-sale accounting
Test all six classification criteria, measure the asset group, and decide when depreciation stops with free FAR questions.
The decision that earns the point
Classify the item before measuring it
A long-lived asset or disposal group enters held-for-sale accounting only when all six ASC 360 criteria are met. A qualifying item is measured at the lower of carrying amount or fair value less cost to sell, and depreciation stops while the classification remains appropriate.
Exam use
FAR can test every classification criterion, the initial write-down, later changes, depreciation, presentation, and the separate discontinued-operation threshold.
Your scratch-paper plan
Solve it in three moves
- 1
Prove all six criteria
Require authorized management commitment, immediate-sale availability, an active buyer program, a probable qualifying sale generally within one year, active marketing at a reasonable price, and actions showing significant changes or withdrawal are unlikely.
FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14 - 2
Measure the lower amount
Compare carrying amount with fair value less the stated cost to sell and recognize any required write-down.
FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14 - 3
Stop depreciation after classification
Cease depreciation only after the asset or disposal group satisfies the held-for-sale criteria and while that classification remains appropriate.
FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14
Worked problem
Work the facts before choosing the answer
CPAPass illustration assumptions: an ASC 360 long-lived asset group satisfies all six held-for-sale criteria. It has a $300,000 carrying amount, $290,000 fair value, $10,000 cost to sell, and no separate liability or other measurement adjustment.
CPAPass original exam illustration using stated assumptions
Show the work
Fair value less cost to sell is $280,000, which is $20,000 below the $300,000 carrying amount.
Rule source: FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14Answer
Write the asset group down to $280,000, recognize a $20,000 loss, and stop depreciation while held-for-sale classification remains appropriate.
Rule source: FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14Do it now
Test the same decision with a fresh question
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Try the changed facts
Two held-for-sale accounting practice questions
Original CPAPass questions using U.S. GAAP. Work them here without an account. For offline practice, request the free FAR MCQ and TBS PDFs by email.
MCQ and TBS practice PDFs. Email required.
A sale plan is not the complete test
Authorized management commits to sell a machine. It is available for immediate sale, a sale within nine months is probable, its planned asking price is reasonable, and a significant plan change is unlikely. However, the entity has not begun an active program to locate a buyer or the other actions needed to complete the sale. Carrying amount is $240,000 and estimated fair value less cost to sell is $220,000.
Worked solution
Answer: C. Continue held-and-used accounting; assess impairment under those rules as applicable.
- Identify the missing active program to locate a buyer and complete the sale.
- Keep held-and-used accounting, including depreciation. Evaluate any impairment indicators under the applicable held-and-used model.
- The two stated values alone do not establish a $20,000 held-and-used impairment loss or discontinued-operation presentation.
Statement effect: No held-for-sale adjustment follows yet. A planned sale and an automatic write-down are separate conclusions.
Rule reference: ASC 360-10-45-9(c): active buyer programA later recovery has its own ceiling
A single machine meets all six held-for-sale criteria. Its carrying amount is $240,000; fair value is $205,000 and cost to sell is $5,000. It has no earlier held-and-used impairment. After the initial write-down, fair value rises to $260,000 and cost to sell remains $5,000. The machine remains held for sale and has not been sold.
Worked solution and journal entry
Answer: D. $40,000
- Initial measurement: $205,000 - $5,000 = $200,000; recognize a $40,000 loss.
- Later fair value less cost to sell: $260,000 - $5,000 = $255,000, a $55,000 increase.
- Limit the gain to the $40,000 cumulative held-for-sale loss. Ending carrying amount is $240,000; continue to suspend depreciation while classification remains appropriate.
Swipe the schedule to see every column.
| Checkpoint | Fair value less cost to sell | Carrying amount | Loss / gain |
|---|---|---|---|
| Initial classification | $200,000 | $200,000 | $40,000 loss |
| Later reporting date | $255,000 | $240,000 | $40,000 gain |
Journal entry
Later recovery entry; the initial $40,000 write-down was recorded separately.
- Asset held for sale
- Debit
$40,000Credit
- - Gain on held-for-sale remeasurement
- Debit
-Credit
$40,000
| Account | Debit | Credit |
|---|---|---|
| Asset held for sale | $40,000 | - |
| Gain on held-for-sale remeasurement | - | $40,000 |
Statement effect: The machine returns to a $240,000 carrying amount. The remaining $15,000 excess of estimated sale proceeds over carrying amount is not recognized before sale.
Rule reference: ASC 360-10-35-40 and 35-43: recovery limit and depreciationThe trap and the repair
Common trap
Stopping depreciation after management merely discusses a sale ignores the other five criteria and the authorized-commitment requirement.
Repair
Check all six criteria before comparing carrying amount with fair value less cost to sell.
Six-criterion gate
One missing criterion blocks held-for-sale classification
The measurement shortcut applies only after the complete classification test is satisfied.
| Criterion | Fact to confirm | Failure consequence | Authority |
|---|---|---|---|
| Commitment and availability | Authorized management commits, and the item is available for immediate sale in present condition | Continue held-and-used accounting | FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14 |
| Buyer program and probability | Active buyer search has begun, and a completed sale is probable generally within one year | Continue held-and-used accounting unless the stated exception applies | FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14 |
| Reasonable marketing price | Active marketing price is reasonable relative to current fair value | Excessive pricing can show the asset is not available for immediate sale | FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14 |
| Plan stability | Required actions indicate significant changes or withdrawal are unlikely | Do not classify when the plan is not sufficiently committed | FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14 |
After a miss
Repair a held-for-sale miss
- 1
Write all six criteria and cite one supplied fact for each before performing measurement.
- 2
Rework the illustration after changing the marketing price to an unreasonable amount and explain why no held-for-sale calculation follows.
- 3
Answer a fresh FAR disposal question and state classification, measurement, depreciation, and discontinued-operation conclusions separately.
Your exam workflow
- Step 1Read the requirementIdentify what the task asks you to decide about held for sale accounting.2026 Uniform CPA Examination Blueprints
- Step 2Sort the factsRequire authorized management commitment, immediate-sale availability, an active buyer program, a probable qualifying sale generally within one year, active marketing at a reasonable price, and actions showing significant changes or withdrawal are unlikely.FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14
- Step 3Apply the ruleCompare carrying amount with fair value less the stated cost to sell and recognize any required write-down.FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14
- Step 4Check the outputCease depreciation only after the asset or disposal group satisfies the held-for-sale criteria and while that classification remains appropriate.FASB ASC 360-10-35-43 through 35-44 and 360-10-45-9 through 45-14
Keep the next step narrow
Quick questions
What is the shortest useful answer for held for sale accounting?
A long-lived asset or disposal group enters held-for-sale accounting only when all six ASC 360 criteria are met. A qualifying item is measured at the lower of carrying amount or fair value less cost to sell, and depreciation stops while the classification remains appropriate.
How can held for sale accounting appear on the CPA Exam?
FAR can test every classification criterion, the initial write-down, later changes, depreciation, presentation, and the separate discontinued-operation threshold. The exact task can change, so identify the governing facts before applying the rule.
What is the most common mistake with held for sale accounting?
Stopping depreciation after management merely discusses a sale ignores the other five criteria and the authorized-commitment requirement. Check all six criteria before comparing carrying amount with fair value less cost to sell.
Where should I practice held for sale accounting?
After the worked example, use FAR practice for a fresh question that requires the same decision. If the miss depends on discontinued-operations threshold, review that handoff before trying another set.
How should I review held for sale accounting after a missed question?
Write all six criteria and cite one supplied fact for each before performing measurement. Rework the illustration after changing the marketing price to an unreasonable amount and explain why no held-for-sale calculation follows. Answer a fresh FAR disposal question and state classification, measurement, depreciation, and discontinued-operation conclusions separately.