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Hi
I have a question regarding Assets held for sale
If we have an asset £250,000 less depreciation £50,000. Carrying value would be £200,000
We revalue the asset in £195,000 and costs to sell the asset £10,000Taking into account the value will be the lower between carrying value £200,000 and Fair value less costs to sell £195,000-£10,000 = £185,000, the asset will be valued in £185,000
I have seen in my book the entry would be
185,000 Asset held for sale (DR)
15,000 P&L(DR)
Asset (CR) 200,000But, do we keep the accumulated depreciation in SFP, when the asset has been reclassified as “held for sale”? We are not going to depreciate this asset anymore, so what do we do with it?
Thanks in advance
Pilar
I would say (to decrease the value of the asset in the revaluation)
50,000 Acc Deprec (DR)
5,000 P&L(DR)
Asset (CR) 55,000With this we would have asset revalued (under revalued) and then
185,000 NCAHFS (DR)
10,000 P&L (DR)
Asset(CR) 195,000Can you please tell me if this is correct?
Thanks
Pilar
Hi,
Welcome to Open Tuition, I hope you’re finding what we’ve done of use.
When we CR Asset 200,000 this is just the net effect of CR Cost 250,000 and DR Acc. depreciation 50,000. So overall on classification as held for sale it looks like this:
DR NCA-HFS 185,000
DR Acc. depreciation 50,000
DR Profit or loss 15,000 (balancing figure)
CR Cost 250,000Hope this helps, shout if it doesn’t.
Thanks
yes, thanks… I have done the same but in 2 different steps… essentially, when you revalue the asset, you have to write down the Acc depreciation and you recognise the impairment in the value of the asset (crediting the asset account), the difference is the P&L balancing figure, and then, when you reclasiffy as NCAHFS, the loss is because you have the costs to sell
The main question is … if you reclassified the asset, you cannot leave the Acc depreciation in SFP, as this asset has been transferred to Non-Current Asset held for sale… am I correct?
Thanks a lot for your kind help from Spain… sometimes is difficult to understand the concepts when english is your second lenguage (and sorry if sometimes I explain everything in a “difficult way”!!!!) 🙂
Hope it’s lovely and sunny in Spain!
Yes you’re correct in that you cannot leave the accumulated depreciation in the SFP on transfer as held for sale.
Keep up the hard work and don’t worry you explain everything perfectly.
Thanks
Hello, my question is:
At the reporting date an asset is identified as held for sale.at the reporting date the carrying value of asset was 150,000(original cost £200,000 two years ago).the assets has 10 year life and entity has a policy to depreciate using the straight line method.
what should depreciation be for year?The answer is £15,000.how come this could be when asset should be depreciated on original cost before it held for sale.so I think it should be £ 20,000.
Thanks
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