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Hi, hope you will be in good health..sir i just want to confirm one thing from you with respect to non current asset held for sale…
My question to you is that once we classify non current asset as held for sale then we make this entry :
Dr Held for sale
Cr. Non current asseti know that we will measure held for sale at lower of:
1. Carrying value at date of classification
2. Fair value (at date of classification) less Cost to saleis that right ?
And my second most important question to you is that are we also suppose to credit the non current asset with same amount i.e (lower of 1. Carrying value at date classification 2. Fair value at date of classification less cost to sale) ? or we re supposed to credit non current asset with carrying value only ?
Thanks for your cooperation always
“i know that we will measure held for sale at lower of:
1. Carrying value at date of classification
2. Fair value (at date of classification) less Cost to saleis that right ?” – Yes, correct
“are we also suppose to credit the non current asset with same amount i.e (lower of 1. Carrying value at date classification 2. Fair value at date of classification less cost to sale) ? or we re supposed to credit non current asset with carrying value only ?” – you will credit the asset account with the carrying value. The debit to the Held for Sale account will be the carrying value unless fair value less costs to sell is lower. In that case, the difference will be debited to statement of profit or loss as an expense
OK?
Sir, you are trying to say that we will debit the held for sale with the rules which i have described above
And we will credit the asset account with the carrying value alwaysOk, But if we have debited held for sale at fair value less cost to sale and we have credit the asset with carrying value, then in this case difference will arise because of diffferent amount, so difference will go to income statement is that what u are trying to say?
If yes, then what name will we give to that gain or loss in income statement ..gain or loss on held for sale ? Doesnt it look weird ? Never heard of it before
Seconly if asset which was previously classified as held for sale is not sold during the year and neither management is commiitted to sale that asset then we will make the following entry :
Dr Non current Asset
Cr. Held for saleIn that case will debit non current asset with carrying value of asset, which would have been there had asset not classified as held for sale..Right ?
Secondly, we will credit held for sale with lower of
1. Carrying amount ( carrying value which would have existed had asset not classified as held for sale )
2. Recoverable amount of asset at date of decision not to sell
And any difference which will arise between held for sale and non current asset will be either charge or credited to income statement , Right ?
” is that what u are trying to say?” – it’s not what I am trying to say! It’s what I AM saying
And just because YOU’ve never heard of it, does that make it weird?
“In that case will debit non current asset with carrying value of asset, which would have been there had asset not classified as held for sale..Right ?” – No, not with the carrying value that existed before classification as held for sale.
Far value reduction represents an impairment so it will be debited back to the asset account at fair value less the depreciation that would otherwise have been charged on that fair valued asset
I didnt understand your second msg , let suppose non current asset is classified as held for sale and it didnt get sale during the year and management has neither committed to sale the asset..so we are goin to make this entry :
Dr. Non current Asset
Credit held for saleI know that with which amountn we will credit held for sale ( lower of carrying value which would have existed if we dont classify asset as held for sale Or recoverable amount at the time when company make decision to not to sale asset), but i dont known that
1. With which amount will be debit the Non current asset ?
2. If any difference come, will it go to profit and loss ?Are you trying to say that non current asset will be valued at carrying amount , which would have been exitsed if we don not classify the asset as held for sale rather if we continue to depriciate the asset ..
“1. With which amount will be debit the Non current asset ?” – Fair value less the year depreciation that was avoided by classification as held for sale
“2. If any difference come, will it go to profit and loss ?” – Yes! Where else could it possibly go?
“Are you trying to say that non current asset will be valued at carrying amount , which would have been exitsed if we don not classify the asset as held for sale rather if we continue to depriciate the asset ..” – No, that is not what I’m saying (note, it’s not what I’m saying not “what I am trying to say”)
It will be put back into assets at fair value less the year’s depreciation that was avoided
Enough now – you’re doing it again! You’ve seized upon a problem like a dog will seize a toy and you’re shaking it to death! Trust me here – it’s not going to come up in December except possibly for 2 marks.
Concentrate on consolidations, preparation of financial statements for a single company, cash flows and interpretation of financial statements and leave these other IASs / IFRSs to be swept up almost as an after-thought
Ok, last question with respect to this topic…if the asset is on cost model then wont we debit the asset by cost less depriciation rather than fair value less depriciation ?
No – we reclassified it as fair value because that was lower than cost ie it was impaired. Unless it has been unimpaired we could not justify transferring it back at cost less depreciation because we have already acknowledged its impairment
Ok sir i have a last query from u with respect to this topic after which i wont ask question with respect to this topic please sir 🙁
My question to you is that lets suppose we have classified an asset as held for sale asset and we are testing it for impairment and lets suppose we face this situation
Carrying value of asset is 1000 and fair value less cost is 3000Now clearly there is no impairment here, but my question to you is that what will we do here ..?
Should we now have to check that at what amount (either cost or fair value less cost to sale ) we have valued the held for sale asset ?if we have previously valued asset at carrying then we wont make any adjustment ?
But if we have previously valued asset at fair value then obviously we will make adjustment , we will debit asset and credit income statement Right ?
If yes, than standard says that we will credit gain on increase in fair value, to income statement to extent we have charged impairment loss to income statment with respect to that asset, my question to you is that where will remaing gain? We will transfer respective gain to income statement but where will remaing gain go
Thanks soo much open tuition and sir mike ..you are doin great job here to help we people out
Here’s an extract from the IASplus website:
“Impairment.
Impairment must be considered both at the time of classification as held for sale and subsequently:
At the time of classification as held for sale.
Immediately prior to classifying an asset or disposal group as held for sale, impairment is measured and recognised in accordance with the applicable IFRSs (generally IAS 16 Property, Plant and Equipment, IAS 36 Impairment of Assets, IAS 38 Intangible Assets, and IAS 39 Financial Instruments: Recognition and Measurement/IFRS 9 Financial Instruments).
Any impairment loss is recognised in profit or loss unless the asset had been measured at revalued amount under IAS 16 or IAS 38, in which case the impairment is treated as a revaluation decrease.
After classification as held for sale.
Calculate any impairment loss based on the difference between the adjusted carrying amounts of the asset/disposal group and fair value less costs to sell.
Any impairment loss that arises by using the measurement principles in IFRS 5 must be recognised in profit or loss [IFRS 5.20], even for assets previously carried at revalued amounts. This is supported by IFRS 5 BC.47 and BC.48, which indicate the inconsistency with IAS 36.”
OK?
And you’ve praised me and opentuition enough now – there’s no need to end every post with overflowing gratitude 🙂
No sir i already know about impairment, you did not understand my question 🙁
my question is not regarding impairment, rather my question is of opposite situation than impairment when the asset is classified held for sale
Lets suppose we have held for sale asset and we have tested it for impairment, and we we found out that its carrying value is 1000 and fair value less cost to sale 4000..
Now, in this what will we do ?….will we see that at what amount we have valued the held for sale asset
If we have valued the held for sale at carrying value at date of classification then we wont make any adjustment
But if we have Valued held for sate asset at fair value less cost to sale then, then we will definately make adjustment and will increase the fair value Right?
And for the second case i.e if asset is valued on fair value less cost to sale and there is increase its fair value then gain will go to income statement to the extent we have charged impairment loss in income statement with respect to that asset, my question is where will remaining gain go ?
By the way, i do respect open tuition from botttom of my heart, there is nothing as overflowing 🙂
This is November 14 at 16.09… “Ok, last question with respect to this topic”
November 15 at 2.15am “Ok sir i have a last query from u with respect to this topic after which i wont ask question with respect to this topic please sir ”
And this latest “last question” is November 15 at 11.34am! How many last questions are you going to have?
It’s unlikely that fair value will increase over the original fair value assessment. Why? Because the asset hasn’t been sold even though the directors are actively marketing the asset at a price that is realistic. If fair value were to increase, how come nobody has bought it? It won’t be re-assessed except downwards after its initial classification as held for sale!
No more last questions on this topic!
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