June 2013 Q3 (c)

Is there a problem with understanding the official printed solution?

I reproduce it below – let me know if there’s anything in the solution about which you are uncertain

Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, a disposal group is classified as held for sale where its carrying amount will be recovered principally through sale rather than continuing use. The sale should be expected to be complete within one year from the date of classification. A disposal group can, exceptionally, be classified as held for sale/discontinued after a period of 12 months if it meets certain criteria. These are: that during the initial one-year period, circumstances arose that were previously considered unlikely and, as a result, a disposal group previously classified as held for sale is not sold by the end of that period. Also during the initial one-year period, the entity took action necessary to respond to the change in circumstances such that the non-current asset (or disposal group) is being actively marketed at a price that is reasonable, given the change in circumstances, and the criteria for classification as held for sale are met.
The draft agreements with investment bankers appear not to be sufficiently detailed to prove that the subsidiary met the criteria at the point of classification as required by IFRS 5. This requires the disposal group to be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups. Also, Janne had made certain organisational changes during the year to 31 May 2013, which resulted in additional activities being transferred to the subsidiary. This confirms that the subsidiary was not available for sale in its present condition as at the point of classification. Also, the shareholders’ authorisation to sell the subsidiary was only granted for one year and there is no indication that this was extended by the subsequent shareholders’ meeting in 2013. The subsidiary should have been treated as a continuing operation in the financial statements for both years ended 31 May 2012 and 31 May 2013.

You’re welcome, but do post again if there’s any matter about which you are not sure